A taxing question in neighboring W.Va.

A taxing question in neighboring W.Va.

Just across the state border, 40 or so minutes away from Pittsburgh, an interesting public policy matter is unfolding.

And, as per usual, it’s filled with the usual machinations of those who believe government is the public’s master, existing to promote dependency and to command the economy.

The West Virginia Legislature is considering a commonsense measure that would repeal the Mountain State’s personal property tax on manufacturing machinery, equipment and inventory.

But just this past weekend, Democrat state Sen. Bill Ihlenfeld penned an op-ed in a local newspaper that doesn’t tell the whole story.

In his zeal to scare West Virginia workers into believing that an important business tax cut will lead to “more robots and fewer West Virginia workers,” Ihlenfeld left out a few pertinent facts.

The senator says the repeal will lead to an estimated $18 million loss in tax revenue to four Northern Panhandle counties – used to fund, in part, such things as fire departments, animal shelters and senior services —  and it could help to escalate the state’s projected budget deficit.

But as The Tax Foundation noted last year, West Virginia’s tax structure isn’t exactly conducive to business. “Outmoded” and “uncompetitive” are two words the foundation used.

And the kind of taxes now up for repeal only do one thing – “discourage investment, since new, undepreciated equipment has a higher taxable value than older equipment, even if its continued use is inefficient, and since it may be possible to locate some new capital investment in other states,” the foundation concluded.

Additionally, it reminds that extending such taxes to inventory “imposes high compliance costs for businesses and can create strong incentives for companies to locate inventory in states where they can avoid these harmful taxes.”

“West Virginia is one of only 10 states which still tax inventory,” the foundation says.

The bottom line is that such taxes “force companies to make decisions about production and distribution based on tax implications rather than sound business practices.”

“They also impose high compliance costs, since these taxes are what is known as ‘taxpayer active.’ That means that a company must track the acquisition price and depreciation of each piece of property, and the value and location of all inventory, along with the relevant assessment ratios and millages, and applicable credits, abatements, and refunds, to calculate and remit the tax,” The Tax Foundation further states.

Sen. Ihlenfeld, citing a study of a similar tax repeal in Ohio, fears that a West Virginia version of the repeal would result in what that study said were firms deciding “to invest in capital rather than hiring new workers when they receive this tax benefit.”

It’s sheer pandering gobbledygook, a smokescreen designed to give cover for a regimen of taxation that only can retard economic growth. God forbid that a company invest in capital, which is key to companies remaining competitive and, yes, helping to create more jobs.

Goodness gracious, we can’t have privately generated economic growth that supplants the sultans of dependence, the government almsgivers, now can we.

Indeed, as Ihlenfeld also wrote, “the relationship between tax cuts and economic growth is complicated.”

That’s especially true when the other side of the equation – the power of free markets over those handcuffed by onerous taxation and excessive regulation — is given such short shrift.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).