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Property taxes targeted in W.Va. race

September 27, 2011

CHARLESTON, W.Va. — In West Virginia's special election for governor, both Republican Bill Maloney and acting Gov. Earl Ray Tomblin, the Democratic nominee, favor cutting some property taxes. Either winner would face several hurdles, including the state constitution and the schools and local governments that now rely on the revenue.

Tomblin and Maloney have talked about ending property taxes on business inventory. Maloney, a Morgantown business owner, has also targeted taxes on commercial machinery and equipment. Both talked about property taxes during this month's debate co-sponsored by AARP and the West Virginia Broadcasters Association.

"It's a disincentive to investing in a new mill, a new chemical plant," Maloney said at the Charleston event. "Look up and down this valley, that's one of the big reasons we don't have the thriving economy, or manufacturing base, here."

But the West Virginia Constitution tightly controls how the state taxes both real estate and "personal" property. That latter category includes vehicles as well as machinery, equipment and inventory. A majority of voters would have to agree to amend those controls before the state could scale back or repeal any taxes on property.

That may prove a tough sell. Property taxes are the key revenue source for local and county governments, and also fund public schools. So-called personal property taxes paid by businesses yielded $252 million last year, or 18 percent of all property tax collections, according to figures cited by the West Virginia Association of Counties.

"It's a significant hole in the state budget when you take out the personal property taxes that go to schools," said Patti Hamilton, the association's executive director. "For some counties, you're talking 50 percent of their budgets lost without the personal property tax."

During the debate, Maloney suggested allowing municipalities and counties to tax in different ways.

"We need to open up the playbook, get everybody in a room, and figure out a way to tax on a more fair basis," Maloney said.

Hamilton called for concrete proposals to keep sufficient funding for these governments and for schools.

"For me, it's irresponsible to do away with those taxes and not present replacement options," she said. "Would residential property taxes have to be increased? There are major questions that have to be answered."

Hamilton also said that to win over voters, lawmakers might consider extending cuts or repeals to residential personal property taxes. That, too, would be a mistake, she said, without offsetting the resulting revenue losses.

"I think there would be tremendous pressure to include non-business personal property taxes, which for most people is a car tax," Hamilton said. "Including that will increase its chances of passage, but also the expectations placed on lawmakers."

The Oct. 4 special election will decide who will complete the term of now-U.S. Sen. Joe Manchin. The Democrat resigned as governor after winning election to his current office in 2010. Earlier that year, Manchin had proposed a constitutional amendment to exempt or reduce tax rates on non-real estate property. But that proposal also required lawmakers to replace all revenues lost, if voters approved amending the constitution.

The measure failed amid fears among counties regarding new revenues. The West Virginia Manufacturers Association also balked because the measure applied only to new property, not property already on the books.

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