Restore Balance Solution

Reduce The High Business Tax Burden

West Virginia's overall tax burden is one of the highest in the nation, particularly on businesses. West Virginia has the third highest business tax rate for its Corporate Net Income Tax, and is one of a handful of states that also imposes a Business Franchise Tax.  While Governor Manchin and lawmakers have enacted the first reductions in the state's business tax structure, more needs to be done to bring West Virginia in line with other states.

Provided is additional information about West Virginia's tax situation:

West Virginia Ranks Third Highest In Terms Of GSP Business Taxes

The Council On State Taxation (COST) has released a new study that analyzes state and local tax burdens on business. The study shows that business taxes in FY2005, once again, rose faster than non-business taxes; consequently, 44 percent of all state and local taxes are now paid by business. Click here to view the study. According to the report, West Virginia ranks among one of the highest states in terms of state and local business taxes as a percent of private-sector economic activity (FY2005).   West Virginia ranks third highest at a rate of 6.6 percent, equal with North Dakota .  Only Wyoming (at 9.6 percent) and Alaska (at 9.3 percent) rank higher.  In addition, West Virginia businesses pay the highest percentage of local taxes – 80.3 percent – than in any other state.

West Virginia Ranks Near Bottom In Latest Business Tax Ranking

(Editor’s Note:  Provided is a Feb. 27, 2006 press release from the Tax Foundation.)

The ten states with the most business-friendly tax systems this year are: Wyoming, South Dakota, Alaska, Florida, Nevada, New Hampshire, Texas, Delaware, Montana and Oregon.  This ranking comes from the third edition of the Tax Foundation’s State Business Tax Climate Index, by Foundation economist Curtis S. Dubay and Scott A. Hodge, President of the Tax Foundation. The study ranks the 50 states on how “business friendly” their tax systems are, providing a roadmap for state lawmakers concerned with keeping their states tax-competitive.

“Every one of the best tax systems raises sufficient revenue without imposing at least one of the three major state taxes—sales taxes, personal income taxes and corporate income taxes,” said Dubay.  The ten states with the least hospitable business tax climates are: New York, New Jersey, Rhode Island, Ohio, Vermont, Maine, Kentucky, Nebraska, Iowa and Arkansas. West Virginia ranks number 35. (Click to see listing.) “States do not enact tax changes in a vacuum,” said Hodge. “Every tax change will affect a state’s competitive position relative to its neighbors, as well as globally.”

The goal of the index is to focus lawmakers on good tax fundamentals in their states, rather than short-term tax abatements and exemptions designed to temporarily lure high-profile companies, baseball teams, and auto plants from other states. Generally the index rewards tax codes that are neutral; that is, they have low, flat tax rates that apply to everyone. This makes tax law simpler and more transparent and avoids double taxation. The worst state tax codes tend to have:

• complex, multi-rate corporate and individual income taxes;
• above-average sales tax rates that don’t exempt business-to-business purchases;
• complex, high-rate unemployment tax systems; and
• high effective property tax rates, as well as a host of other wealth-based taxes.

“The ideal tax system, whether at the state, federal, or international level, should be neutral to business activity,” said Dubay. “In such a system, people would base their economic decisions on the merits of the transactions rather than the tax implications.”

WV Ranks 21st in Overall Tax Burden on Residents -  http://money.cnn.com/2006/04/10/pf/taxes/taxfriendly_states_2006/index.htm

W.Va. Taxes Outgrow Population
Census says higher per-resident taxes due to low growth
Charleston Daily Mail, June 3, 2004
West Virginia has moved from 24th to 18th in the nation in the amount of state taxes it collects per resident, newly released figures show. The main culprit driving the upsurge is a population in the state that shrunk slightly over the past decade while the population in all 50 states grew by 12 percent. From 1993 to 2003, the total state tax revenues in all 50 states increased by 54 percent. In West Virginia, total state tax revenues have increased 45 percent during the same time. Because of the declining population, however, those increases pushed West Virginia higher up the list of taxes it collects per resident. (Click to read entire story)

Editorial:  West Virginia Is Not Competitive
Companies can avoid a state tax simply by ignoring the entire state
Charleston Daily Mail, September 6, 2005

Editorial: Numbers
Prudent tax reform necessary to sustain growth of economy
The Register-Herald, July 9, 2004

W.Va. Tax Tough On Business, State Official Says
The Charleston Gazette, April 16, 2004

Resources

Surrounding States Implementing Tax Changes (click to read)

West Virginia State Tax Department
Fiscal/Budget/Tax Overview Report, 2004

Past Rankings

National Ranking - West Virginia is the 13th worst state regarding tax friendliness
http://money.cnn.com/pf/features/lists/taxesbystate2005/index.html
http://money.cnn.com/popups/2005/real_estate/tax_friendly/picture.1.exclude.html

W.Va.’s State, Local Tax Burden 8th Highest In U.S., Study Finds
The Associated Press, September 11, 2004

West Virginia's Overall Tax Burden - 8th Worst In U.S.
http://money.cnn.com/pf/features/lists/taxesbystate2004/