West Virginia Chamber - 2020 Position Papers

Issue

Should the West Virginia Legislature adopt the 2019 Judicial Compensation Commission’s recommendations pertaining to judicial pay increases in West Virginia?

Background

Pay for Supreme Court justices, circuit judges and family court judges in West Virginia has been unchanged since 2011, nearly a decade. Pay for magistrates was amended in 2013, with the last increases taking place for some magistrates in 2017.

To help guide its decisions on judicial pay, the West Virginia Legislature created the Judicial Compensation Commission (Commission) in 2016 to serve as an independent organization in making analytical-based recommendations on the appropriate salary levels of judges in West Virginia.

In 2019, the Commission found that the salaries of state supreme court justices and circuit judges in West Virginia each ranked 53rd when compared to their peers in the rest of the nation. When adjusted for cost-of-living, West Virginia’s judicial pay ranks 47th in the nation. The current salaries of judicial offices in West Virginia are as follows:

• Supreme Court Justices: $136,000
• Circuit Judge: $126,000
• Family Court Judge: $94,500
• Magistrate: $57,500

To address the lower-than-average pay of judges in West Virginia, the 2019 report of the Commission recommended pay increases to be passed by the West Virginia Legislature. If fully implemented, the Commission’s recommended raises would lead to Supreme Court Justices and Circuit Court judges ranking 37th and 36th respectively in the nation.

The Chamber's Position

The West Virginia Chamber of Commerce supports ensuring competitive salaries for members of state’s judiciary. The Chamber would note that the last pay raises for many in the judiciary took place nearly a decade ago, and that judges must be compensated in a manner that makes pay competitive with other fields in the legal profession. Having competent, fair and impartial judges is a cornerstone of democracy, and properly compensating them for their work is necessary to ensure that potential jurists are not dissuaded from service by the ability to make a higher salary elsewhere.

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Issue

A comprehensive plan to attract young workers must be put in place in order for West Virginia to take maximum advantage of the state’s economic potential.

Background

West Virginia’s civilian labor force participation rate is 53.8%. This means that out of all working-age West Virginians who are eligible for employment, just slightly over half are in the workforce. While this rate is up from a thirty-year low in 2015, it remains the lowest in the nation. It should be noted that the civilian labor force counts both people who are employed and people who are unemployed and actively seeking employment.

West Virginia’s low labor force participation rate is now leading to another issue – a lack of qualified people in the workforce who can fill available jobs. In 2009, at the height of the Recession, West Virginia had 4.2 unemployed people for every job opening. In 2019, there was one unemployed person for every job opening. In the past four years, West Virginia has added over 30,000 jobs, helping to put more people back to work and get more people to re-enter the labor force. Going forward, West Virginia must attract and retain young workers in order to encourage additional economic development and job creation.

The Chamber's Position

West Virginia has taken some positive steps towards attracting and retaining young workers. The Legislature passed Senate Bill 1 in 2019, which provides last-dollar-in funding for students to attend career and technical college in the state. This program is still it its infancy, but all signs are pointing towards it being a success and helping to provide students with the necessary skills for good-paying jobs. This program should be monitored and consideration should be given to expansion if it continues to be successful.

West Virginia should consider providing tax relief to workers who are saddled with student loans. According to Business Insider, the average West Virginia student-loan borrower owes over $30,000. Given that these loans frequently carry interest rates of 6%-7% or higher, they can take several years or decades to pay off, and typically burden younger workers who are recent college-graduates. Providing tax relief to responsible student-loan debt holders would be a major incentive to remain and work in West Virginia.

Lastly, K-12 public education improvement must remain a top priority for policymakers, students, parents and teachers. Ensuring that our children are equipped to succeed in the global marketplace regardless of their economic situation or background is essential to a developing economy. The West Virginia Chamber supports a wide array of measures that will help West Virginia students compete with their national and international peers.

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Issue

In our ever expanding digital world, broadband access has become a vital necessity for households and businesses alike. Broadband access has rapidly evolved into a critical infrastructure component. In recognition of this shift, many States have implemented broadband initiatives to remain competitive in attracting and retaining jobs. These broadband policy efforts have come to the forefront of State government efforts focused on economic development and job creation. It is abundantly clear that affordable, high speed broadband access is now a dominant consideration for the business community, their employees, their customers, and their supply chains.

Background

Since the advent of the Broadband Internet era in 2000, telecommunications providers have collectively invested nearly $4 billion in building a fiber optic middle mile and last mile infrastructure for commercial and residential broadband services in West Virginia. This investment has resulted in a dramatic expansion of broadband availability in the state, however, there are many rural communities that still do not have access to broadband service at speeds that meet or exceed the new FCC definition. The majority of these communities are sparsely populated and geographically removed from more populated areas of the State. Due to these factors, private sector investment in these markets is unlikely because opportunities to receive a return on their investment are very limited, if they exist at all.

The Chamber's Position

Broadband services are clearly essential to economic development, healthcare, education, business and daily life in the 21st Century. While broadband providers have and are continuing to make substantial investments in improving and expanding the availability of services in the state, broadband investments in the most rural portions of our state will remain an economic challenge because of the high cost of deployment and low customer density. The Chamber supports any state policy that will incentivize the private sector to invest in unserved and underserved markets throughout the State. For example, the State should consider the use of tax credits for the provision of new broadband service in underserved and unserved markets, as well as the creation of a loan guarantee program, which will assist smaller companies by providing access to capital so that they can invest in these same geographic areas.

The Chamber also believes that any plan approved by the Legislature should be focused on creating incentives for private providers to invest their resources in broadband service extensions, and that any scarce state resources which might be devoted to broadband projects for unserved areas should operate through an open and competitive process.

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Issue

West Virginia has made significant progress in the past few years in adopting meaningful civil justice reform legislation. Many of the laws that made West Virginia stand out in a negative light have been resolved by the decisive actions of the 82nd, 83rd and 84th West Virginia Legislatures.

Thanks to the reforms that have been undertaken, legal experts both inside West Virginia and throughout the nation recognize that steps are being taken to ensure West Virginia will become a place with fair and consistent laws.

Despite the progress, some additional reforms must be passed to continue the goal of bringing West Virginia into step with the rest of the nation. Legislation that is still needed includes: medical monitoring, collateral source rule, phantom damages, fair mediation system, and seatbelt use admissibility.

These reforms are needed in order to continue towards the goal of “Making West Virginia Irresistible to Business.”

The Chamber's Position

Provided are the components necessary to enact additional legal reforms that will eliminate risks and impediments on West Virginia employers and revitalize the state so it truly can grow its economy.

• Full and Thorough Appeals - The West Virginia Chamber believes an appeal of right is fundamental to equal justice and due process. This includes an appellate process that provides a full and thorough review of cases that warrant appeal.
• Collateral source - Allow courts to consider amounts that plaintiffs have received as compensation from other, non-family sources to cover costs in determining damages. When juries are trying to determine how much economic loss a plaintiff has suffered for compensation, they should consider all sources, which offset that economic loss in determining a just verdict and avoid unfair double-dipping by jury award winners.
• Phantom Damages - Allow plaintiffs to recover only the amounts actually incurred for medical services, rather than the full sticker price that is listed before negotiations are completed.
• Online Case Management System - Continue the implementation of a statewide and uniform online system for case management of all circuit and family courts in West Virginia.
• Fair Mediation - Mediations are very successful in resolving civil cases without the expense of a trial. Some circuit court judges who will preside over a trial, however, opt to mediate the case themselves rather than assign it to a different judge or mediator. This can have a chilling effect on the ability of parties’ to speak candidly about issues. Legislation should be passed to require a mediator to be different than the judge would potentially preside over a trial.
• Seatbelt Admissibility - West Virginia law requires the use of a seatbelt in a moving vehicle. Failure to comply with this law can lead to increased risk of injury or death in the event of an accident. Legislation should be adopted that allows evidence of whether or not a seatbelt was worn to be admissible into court, thereby allowing a judge and/or jury to weigh all aspects of a case./li>
• Medical monitoring - In 1999, the West Virginia Supreme Court established a new cause of action, which allows an individual who has been exposed to a proven hazardous substance to recover damages for future medical monitoring when the individual has no physical injuries. This new cause of action exposes many of West Virginia’s businesses to potential liability even though there is no actual injury associated with the exposure. The Legislature should enact legislation to correct the Court’s decision.

This list of recommended provisions is offered as a series of additional legal reforms which would further bring West Virginia into the mainstream of other states in terms of rules and laws governing court proceedings.

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Issue

The business case for employee diversity is real. Diversity in the workplace is beneficial. People with different backgrounds bring different perspectives and create a more robust, stimulating, and vibrant environment from which everyone can learn and grow. In turn, the expanded base of knowledge leads to more creativity and innovation in the workplace. A diversity of opinions naturally leads to higher quality decisions and improved performance.

Discussion

West Virginia Chamber of Commerce members employ more than one-half of the state’s workforce, giving the Chamber a large and influential voice to articulate workforce needs and preparedness. We are a solutions oriented, member supported organization that gives voice to the needs and concerns of our state’s employers. Our members understand the struggles of finding qualified applicants for well-paying jobs.

There are numerous types of diversity within our culture, including gender, race, age, religion, national origin, sexual orientation and gender identity. Numerous studies confirm the economic reality that diversity and non-discrimination policies are good for business. Companies embracing diversity know that inclusive working environments are good for business. Studies show that employers with non-discrimination policies enjoy greater productivity and lower turnover in their workforces.

Demographic research shows that West Virginia ranks exceptionally low in terms of the racial diversity of our population. According to the 2014 U.S. Census, West Virginia’s total population is 92.5% white, 3.6% black, 1.5% Latino / Hispanic, and 0.8% Asian. West Virginia’s population is, to a large extent, racially homogenous.

In addition to issues of racial diversity, employers also recognize the importance of other types of diversity among their employees, such as sexual orientation and gender identity. More than 90 percent of Fortune 500 companies now include sexual orientation in their workplace nondiscrimination policies, and 61 percent of such companies prohibit discrimination based on gender identity.

The Chamber's Position

We need full participation and inclusion of all groups in order to move West Virginia forward. Our ability to attract new jobs and the job creators, particularly Fortune 500 companies who require diversity within their workforce, is greatly impaired without a strong commitment to diversity.

West Virginia businesses should take full advantage of the opportunities that a diverse workforce represents, and our policy makers should embrace policies that support a diverse and robust workforce in West Virginia. As the U.S. population becomes increasingly more diverse, so too will our state’s workforce in West Virginia. West Virginia’s job creators should embrace diversity and capitalize on the resulting benefits.

West Virginia must be able to attract and retain investment and talent from all backgrounds. The Chamber has long supported diversity in our state and in our workplaces. Many of our Chamber members already have existing personnel policies in effect which promote diversity and inclusion in the workplace. The Chamber also respects the strongly-held faith based views of different religious groups in West Virginia. The Chamber will not support legislation which promotes or allows discrimination, nor which sends the wrong message regarding economic development and job growth in West Virginia. Any “religious freedom” type of legislation must contain a balancing test between religious liberties and government interests, and must operate in a manner which protects the religious liberties of individuals without also infringing on the rights of others in a discriminatory manner. The Chamber will oppose legislation which creates or authorizes new causes of action against employers. Such legal actions would place our state’s employers at a competitive disadvantage with other states.

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Issue

West Virginia’s public education system must continuously strive to ensure students can achieve the results necessary to compete in the global marketplace.

Background

The West Virginia Chamber of Commerce believes that the children of West Virginia deserve a public school system that is the envy of the nation. Our schools must produce educated, versatile, creative problem solvers and responsible, well informed citizens. Our children must be equipped to succeed in the global marketplace regardless of their economic station or background.

West Virginia Chamber of Commerce members employ more than one-half of the state’s workforce, giving the Chamber a large and influential voice to articulate workforce needs and preparedness. Our members understand the struggles of finding qualified applicants for well-paying jobs. Chamber members know that educated and skilled citizens make good workers and help to build robust communities.

When we fail to educate all children, the outcome is predictable: elementary school students with poor skills become middle school students with poor skills, and eventually become high school students without the ability to succeed in post-secondary education or to compete in today's economy. Through the 3rd Grade, children learn to read. After the 3rd grade, children read to learn. If they do not meet this critical benchmark, children continue falling further and further behind and will not be prepared for life after school.

The National Assessment of Educational Progress (NAEP) is the largest continuing and nationally representative educational assessment of American students in all 50 states. This assessment is administered every two years and measures student achievement in the critical subjects of math and reading in both the 4th and 8th grades. In the 2019 NAEP assessment, the percentage of West Virginia students who are considered “at-or-above proficient” rank the state 44th in fourth-grade reading, 45th in eighth-grade reading, 48th in fourth-grade math, and 47th in eighth-grade math. In measuring the important metric of being able to read in order to learn when a child is in the 4th grade, only 30.3%, less than one-third, of 4th graders in West Virginia are considered proficient in reading.

The 2019 WV Balanced Scorecard that was released by the West Virginia Department of Education, which tracks all public schools’ English Language Arts and Mathematics performance, shows that much work remains. According to the state’s own assessments, out of 116 public high schools, 10 meet the standard for English Language Arts and none meet the standard for Math.

Yet from a spending perspective, public education accounts for over 43 percent of the state’s General Revenue Budget (FY 2020). According to the National Education Association (NEA), West Virginia has the 21st highest total spending per pupil in the nation (2019). West Virginia spends $12,613 per pupil. The national average for per pupil spending is $12,602. Despite the state’s significant investment in education that keeps up with national norms, student achievement in West Virginia continues to lag behind the rest of the country.

The Chamber's Position

The Chamber supports efforts to improve the academic achievement of every student in West Virginia. These recommendations provide a framework for a system that allows for more authority and accountability at the local level. The West Virginia Legislature and the West Virginia Department of Education must work together to remove existing impediments that constitute the over-regulation of our education system while guaranteeing benchmarks that raise the bar for West Virginia students to compete successfully with their international peers.

• The Chamber supports an accountability system for schools that is easy to understand and allows for a measurement of year-to-year progress. Accountability systems that are based on academic growth will increase transparency, parental engagement and public pressure to improve. Accountability systems are contributing to improved school performance in other states.
• West Virginia must begin to implement a culture of constant improvement in our public school system. Such a move will help our state become and remain competitive in attracting investment and jobs to West Virginia. This mindset is also needed to combat what is frequently perceived by employers seeking to hire recent graduates as a culture of “mediocrity is OK” in our public school system.
• Transparency in our public education system is critical. A 2012 audit found that West Virginia is one of the most highly-centralized and the most insulated from voter control or input in the country. Requiring an easy-to-use, detailed online portal that allows the tracking of education funds down to the classroom level will enable parents, teachers and policy-makers the ability to explore how their tax dollars are being spent and offer creative solutions on maximizing the efficiency of the state’s investment in education.
• Highly qualified principals and teachers are of great importance to helping students improve academic achievement. Professional development and leadership training should be continuously modernized to ensure that those in the classroom have the necessary resources and support to help our children. Teachers must also be respected as professionals, and given the flexibility to customize teaching methods to better fit the needs of each student.
• The Chamber believes that innovation works in both business and in education. Public charter schools would allow for truly innovative schools where non-traditional operators, such as a group of educators, parents or directors could lead a school or a cluster of feeder schools to recreate itself from the ground up with new ways to best educate its kids. The freedom to operate a low-performing school differently and to move away from the “one size fits all” paradigm will create the best opportunity for students to reach their potential. West Virginia recently joined forty-four states and the District of Columbia in allowing public charter schools, even though no more than three can be created every three years. Every effort should be made to assist in the creation of public charter schools in our state to allow innovative teaching methods where best practices can be learned and applied to traditional schools.
• Additional control should be given to local boards of education to better meet the local realities they face. This control should extend to more flexibility in setting the school calendar, and locality pay to ensure that highly qualified teachers can be attracted and retained.
• Personnel policies within the public education system must be modernized, and principals should be given more responsibility and accountability to ensure they have an effective team in place to lead their schools.
• Schools and local businesses should be encouraged to closely partner with each other. The employer community in West Virginia supports public education and can provide additional resources and support that are not traditionally available to schools. This is not limited to financial support and can extend to internship and mentorship programs to benefit students.
• A continued focus must remain on meeting students’ emotional needs, especially those dealing with family challenges such as drug abuse, homelessness or unemployment. West Virginia should also continue expansion of the U.S. Department of Agriculture’s Community Eligibility Provision to ensure every student receives breakfast and lunch – regardless of their family’s ability to pay.

These policy and legislative recommendations represent part of the Chamber’s long-term commitment to the multifaceted effort to transform our education system in West Virginia. We believe that all West Virginia students should be held to high expectations, with the belief that they can and will achieve success. The West Virginia school system should promote a culture of rigor that makes ‘getting an education’ a serious pursuit which leads to success in life.

The West Virginia Chamber of Commerce is comprised of our state’s leading businesses. We are a solutions-oriented, member supported organization that gives voice to the needs and concerns of our state’s employers. The Chamber is committed to working with state and local officials, teachers, principals and caring citizens to assure the best for our 21st Century students.

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Issue

Municipalities in West Virginia are attempting to use “minor boundary adjustments” to annex additional territory into their limits without direct consent of the affected individuals and businesses.

Background

Annexation is a process by which municipalities can expand their boundaries. Reasons for annexing territory can vary and include the ability to provide services to additional areas, or to increase a municipality’s tax base. West Virginia law permits municipalities to annex additional territory by three general methods:

• 1. Holding an election whereby the voters of the territory to be annexed can approve or disapprove.
• 2. Allowing a majority of the voters or freeholders of an area to petition for annexation.
• 3. Using a minor boundary adjustment, which is subject to the approval of the county commission of the county in which the area to be annexed exists.

Of the three annexation methods in West Virginia, the third – minor boundary adjustments – is generally the most controversial. Under this method, individuals and businesses in an area being considered for annexation do not have the direct ability to approve or disapprove of the plan by voting. This method has been recently attempted by numerous municipalities across West Virginia, with some plans attempting to expand the area in a city by nearly 40%, far surpassing what most would consider to be “minor.”

The Chamber's Position

Businesses thrive on predictability and stability. When employers decide to locate in a particular area, they do so with an understanding of built in costs such as taxes, user fees, etc. If a business suddenly finds itself in the incorporated limits of a municipality, it could conceivably see a major increase in operating costs. For many small businesses, this can be the difference between that business succeeding or failing.

The West Virginia Chamber of Commerce is not opposed to municipalities annexing additional territory for valid reasons. Annexation, however, should be done in a collaborative manner that obtains the consent of individuals and businesses in the area that would be affected. Attempting to force annexation of an area by circumventing the voter-approved options and using a “minor boundary adjustment” removes due process for businesses and citizens and generally leads to disruption and unintended consequences.

The West Virginia Chamber supports legislative solutions that would more narrowly define “minor boundary adjustment” in state code, or require voter approval for any annexation efforts.

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Issue

West Virginia is ground zero for the opioid addiction crisis. Among the many health challenges facing America, none has hit our state harder than opioid addiction. The impact of the opioid crisis on West Virginians is staggering, with an estimated 952 overdose deaths reported in 2018. According to the U.S. Centers for Disease Control and Prevention, West Virginia has the highest overdose rate in the nation, and the overdose rate in 2018 was approximately 52.7 per 100,000 people. In addition to the human cost, of significance is the toll it has taken on the state’s economic growth and development.

Background

In West Virginia, the opioid crisis has contributed to a workforce participation challenge that undermines the competitiveness of existing businesses while creating barriers for new investments. For existing businesses, unfilled vacancies represent lost productivity that makes competing in the regional, national and global economies more difficult. Meanwhile, companies are hesitant to invest in areas where they may not be able to attract and retain the skilled and drug-free workforce they need to operate efficiently.

West Virginia has welcomed many new business investments this year, creating over 17,000 new jobs for the state. But many employers are growing concerned about the lack of qualified workers to fill new jobs. Many Chamber members say drug abuse is a key contributor to that problem. Many people actively looking for work cannot pass the drug tests required for employment, and those who do have jobs are exiting the workforce due to untreated, or undertreated, addictions.

When work is not an option, individuals turn to government programs, such as Medicaid, for support. This transition from gainful work to reliance on public assistance creates a cyclical problem with disastrous, long-term consequences for taxpayers and the economy. According to the White House Council of Economic Advisers, the total economic cost to the nation of the opioid epidemic is over $500 billion per year. Giving patient’s access to effective addiction treatments with a goal of truly ending their addiction is our best chance at getting people back to work and improving our economy.

Addiction continues to threaten opportunities for economic growth – a cyclical problem that will only become more difficult to break in the years to come.

The Chamber's Position

At a time when job openings and investments in West Virginia are growing, we must provide the healthy, productive workforce needed to grow the economy. To do that, treatment, with the goal of full recovery, must be a top priority for our state.

Because every person is different, health care providers and the public must be aware of all evidence-based, FDA approved treatment options. This includes counseling and medication assisted treatments proven to be effective at managing and, hopefully, ending addiction.

Providers must be prepared to develop treatment plans that consider each patient’s individual needs, which may require new education and training. At the same time, patients must have barrier-free access to the treatment they need to recover and return to healthy, productive lives.

Business leaders, health care providers and public officials must work together to address the opioid crisis by ensuring unfettered access to and education around all FDA approved opioid addiction treatments. Only by getting more individuals on the path to recovery will West Virginia truly thrive and reach its full potential.

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Taxation of Tangible Personal Property

The Chamber has recommended in the past and continues to recommend that the West Virginia Constitution be amended to allow the Legislature to, by general law, exempt some or all tangible personal property from ad valorem property taxation and, should such legislation be enacted, for the Legislature to provide one or more means by which additional revenues or revenue sources are made available to the local levying bodies to cover the cost of the personal property tax exemption.

An obstacle to capital investment and reinvestment is the property tax on machinery and equipment and other tangible personal property. Business decision makers will ask why should the capital investment be made in West Virginia when the investment can be made across the border in Ohio or Pennsylvania, or in one of a host of other states, that do not tax tangible personal property for property tax purposes or only nominally tax such property.

There is common agreement among stakeholders that the West Virginia Constitution must be amended before some or all tangible personal property can be exempt from ad valorem property taxation. However, the practical reality is that amending the Constitution is easier said than done. The ensuing pages of this paper discuss some of the reasons why it will be difficult to amend the Constitution. Understanding these challenges also provides opportunities to find solutions to this problem.

Local Concerns

Representatives of local levying bodies have insisted that before they will support a constitutional amendment, they want to know exactly how the lost revenue will be replaced. While most, if not all, of the local levying bodies have this concern, it is of greater concern to levying bodies in those counties that rely more heavily on taxes levied on tangible personal property to balance their budgets. While application of the state aid formula can, in part, insulate county boards of education from this concern, the state aid formula considers only regular property tax levy collections and does not consider voter-approved excess levies and general obligation bond levies. Consequently, all local levying bodies have this concern to one degree or another.

Scope of Fiscal Problem

The scope of the fiscal problem for local levying bodies is demonstrated by data in the State Tax Department’s recently released Classified Assessed Valuations Taxes Levied for the 2018 Tax Year. This report shows that the statewide aggregate of state and local property taxes levied on real property was $949,315,860, while the aggregate tax on personal property was $523,982,657. However, just as real property taxes are not evenly distributed among the 55 counties, neither are taxes on tangible personal property equally distributed among the 55 counties.

More specifically, in 9 of the 55 counties, the amount of taxes levied on tangible personal property exceeded the amount of taxes levied on real property in the particular county. And, in 3 additional counties, the taxes levied on tangible personal property approach 50% of total taxes levied on all property in those counties. The following chart prepared from the State Tax Department’s study supports these statements.

***Click Printable Version Below to View Table***

Additionally, in Cabell, Doddridge, Harrison, Marion, Marshall, Monongalia and Wetzel Counties, the taxes levied on personal property exceeded $20 million, in each county; and taxes levied on personal property exceeded $57 million in Kanawha County.

Solving the Fiscal Problem Requires Two Solutions

The primary issue for local governments has two parts. First, what will be the source(s) of the additional revenue and, second, how will the additional revenue be distributed in order to hold the local levying bodies harmless? While the first part of the primary issue is challenging, the second part of the issue is even more daunting because some counties have more tangible personal property than other counties. Simply put, distribution of the make-up revenue on a per capita basis cannot achieve the desired result. Even if the cap on real property tax levies were increased, which we are not suggesting be done, that would not achieve the desired result either, because there is no correlation between the value of real property in a county and the value of tangible personal property in the same county. Moreover, in tax year 2018, property taxes levied on real property aggregated $949,315,860, which suggests that the levy rates on real property would need to increase by more than double to generate the amount of replacement revenue needed -- $523,982,657.

Secondary issues of the local levying bodies include, but are not limited to, generating replacement dollars to pay annual debt service on general obligation bonds and replacing excess levy dollars which are used by county boards of education to fund items outside the state aid formula, including, but not limited to, providing additional compensation for teachers and school service personnel and capital improvements. County commissions and municipalities frequently use voter-approved excess levies to fund fire service, emergency ambulance service, additional police personnel and other community improvements. They too have voter-approved general obligation bonds outstanding.

Summary of Issue

In summary, there are no easy answers to this $523 million problem. What we do know is that the states with robust economies do not impose property taxes on business tangible personal property. We also know that personal property taxes affect where and when capital investment is made. This is a consideration in the location of new businesses in West Virginia. It is also a consideration when an existing business decides to modernize or expand in West Virginia. Finally, we also know that to fundamentally change West Virginia’s economy from one dependent on fossil fuels to a new, diverse economy something needs to be done about the taxation of business tangible personal property.

The Chamber believes that the evidence is clear and overwhelming that Tangible Personal Property taxes are a drag on the State’s economy and the competitiveness of its businesses. The Chamber urges that the Tangible Personal Property tax issue be kept alive and that further proposals to potentially eliminate the tax or lessen its impact be identified. The Chamber maintains that any solution must be statewide in scope – not piecemeal among levying bodies and/or types of taxpayers.

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Issue

The West Virginia Legislature should enact state tax policies which are perceived as fair, which are easy and cost effective to administer, generate sufficient revenue for the efficient and effective administration of required services, and which promote job creation and economic growth

Discussion

We applaud the West Virginia Legislature’s ongoing efforts to review the State’s existing tax system. The Chamber desires a tax system meeting the following objectives:

• Perceived as fair
• Easy and cost effective to administer
• Supplies sufficient revenues for the efficient and effective administration of required services
• Lower and flatter
• Taxes things that harm public health
• Eliminates the tax on tangible personal property
• Promotes job creation and economic growth

Tax reform should be done carefully and responsibly and not in an effort to create winners and losers, but in an overall fiscally responsible manner, comprehensively reviewing each aspect of West Virginia’s tax structure, creating a flatter and broader system overall with lower marginal rates, encouraging economic growth and investment, and fully recognizing the myriad of intended and unintended consequences and implications of any changes to West Virginia’s tax system. To assist in that effort, the Chamber provides some areas where we believe change may be warranted and additional scrutiny is necessary where West Virginia is out of line with a majority of states in its approach to a particular tax or tax policy.

State Tax Climate Overall

In the Tax Foundation’s recently released 2020 State Business Tax Climate Index, West Virginia ranked as having the 23rd most competitive tax code overall in the nation. (This compares favorably with the states which are contiguous to West Virginia: Pennsylvania 29th, Ohio 38th, Virginia 25th, Kentucky 24th, and Maryland 43rd.) Significantly, West Virginia ranked 15th in Corporate Tax Rank, 18th in Sales Tax Rank, and 17th in Property Tax Rank.

While the State’s overall tax system generally appears competitive, it does place a higher reliance on businesses for tax revenue than our neighboring states and the nation in general. According to a 2018 report by Ernst & Young LLP in Conjunction with the Council on State Taxation and the State Tax Research Institute, in West Virginia, business tax revenues account for 49.3% of state and local tax revenues. While West Virginia ranks in the bottom half of states with regard to this over-contribution of businesses toward total state tax revenue, the contrast is even starker with regard to businesses’ contribution to local tax revenue. With $4 of every $5 collected in local taxes being paid by businesses instead of individuals, West Virginia is the highest state in the country in terms of the amount of local taxes being paid by the business community.

Insurance Premium Tax Rate

West Virginia has some of the highest insurance premium tax rates in the nation. Taxes levied on insurance premiums in West Virginia generate nearly $178,000,000 per year in revenue, which is distributed to the General Revenue Fund, Municipal Pensions, Volunteer Fire Departments, the State Fire Marshal, and the WV Teachers Retirement System.

The tax rate on Property & Casualty insurance premiums in West Virginia is the highest in the nation at 4.55% (4% tax + 0.55% surcharge = 4.55%). The national average for state premium taxes on property & casualty policies is 2.15%. The most common tax rate nationally is 2.0%. The premium tax rates for property & casualty policies in our surrounding states are Kentucky at 2.0%, Maryland at 2.0%, Ohio at 1.4%, Pennsylvania at 2.0%, and Virginia at 2.25%.

For fire insurance policies in West Virginia, our premium tax rate of 5.05% is among the highest in the nation (4 % tax + 0.55% surcharge + 0.5% fire marshal = 5.05%). The national average for state premium taxes on fire insurance policies is 2.7%. The most common tax rate nationally is 2.0%. The tax rates for fire policies in our surrounding states are Kentucky at 2.75%, Maryland at 2.0%, Ohio at 2.15%, Pennsylvania at 2.0%, and Virginia at 3.25%.

Retaliatory taxes are additional taxes levied on insurance companies that are domiciled outside of the taxing state in order to burden those “out-of-state” insurers in exactly the same way that the out-of-state insurer’s state of domicile would burden an insurer from the taxing state. It is intended to “level the playing field” by deterring a state from imposing excessive taxes on non-domiciled insurance companies. Since WV’s premium taxes are higher than most states, WV’s domestic (“in-state”) insurers are taxed at the higher WV premium tax rate for premium written “out of state” or in states other than WV. This is a significant financial drag on any WV domestic insurance company that wishes to grow and write business outside of the state. In the current climate, to be rate competitive with premiums written outside WV, the WV domestic must overcome the premium tax differential (often 2% or more) either by charging a higher rate, accepting reduced profits, reducing expenses or reducing losses compared to the competition in those states. The financial incentive for an insurance carrier is to be domesticated in a low premium tax state due to ‘Retaliatory taxes’.

Tobacco Taxes

Effective July 1, 2016, the tax rates for tobacco products in West Virginia are as follows:

• Cigarettes -- $1.20 per pack
• Cigars and smokeless products -- 12% of wholesale price
• E-tobacco liquids -- 7.5 cents per milliliter

While West Virginia has the second highest rate of smoking deaths in the nation and some of the highest death rates due to cancer, heart disease and other smoking related illnesses, our tobacco tax still remains lower than the national average, and is lower than several of our surrounding states. The average national cigarette tax rate in 2019 was $1.73 per pack. West Virginia’s cigarette tax rate at $1.20 per pack ranks as the 33rd lowest in the nation. Cigarette tax rates in surrounding states are Pennsylvania at $2.60 per pack, Maryland at $2.00, Ohio at $1.60, Kentucky at $1.10, and Virginia at $0.30.

Tangible Personal Property Taxes on Business Inventories, Manufacturing Machinery & Equipment

The West Virginia Chamber supports the elimination of the ad valorem property taxes on tangible personal property and, in particular, the tax on inventory and manufacturing machinery and equipment. This isn’t just a manufacturing industry issue. All West Virginia businesses pay personal property taxes on the value of furnishings, fixtures, equipment and supplies each year. Retailers and most wholesalers additionally pay property taxes on the value of their inventories as of the July 1 assessment date. This particular tax, probably more than others, hurts our West Virginia businesses, fails to promote growth, stifles expansion, discourages job creation, and creates a competitive disadvantage for West Virginia. Its continued existence is a tremendous impediment to economic development. Businesses wishing to locate a new operation obviously consider a state’s tax structure during their due diligence process and our unfavorable comparison to other states on this particular tax is a factor keeping additional businesses from locating here.

Consideration should be given to elimination of this tax because it causes West Virginia businesses to pay taxes on the same machinery and equipment year after year, while discouraging them from upgrading or modernizing their facilities. It discourages West Virginia businesses from expanding or purchasing additional inventory while incentivizing them to move it across the border into another state. The personal property tax is a disincentive to new businesses locating in this state when they compare our tax with other states and can just as easily locate in a state that doesn’t impose this costly and burdensome tax (for example, our neighboring states of Ohio and Pennsylvania). It causes businesses to continue using outdated machinery and equipment (which could be less safe and efficient) rather than upgrading to the newest available technology. It discourages businesses from keeping on hand the inventory they need or that their customers want. It imposes a huge administrative burden, not only on business owners who must report each item of tangible personal property that the business owns as of the July 1 assessment date, but also on state and county assessing officers who must then determine the value of each item of tangible personal property reported each year.

Our local counties and municipalities rely heavily on property tax revenues. Before this tax could be eliminated, the State and local governments would need to identify additional sources of tax revenues to offset revenues lost by its repeal. Further, there are significant State constitutional issues that would have to be addressed as part of this repeal.

Tax Credits to Incentivize Infrastructure Investment and Energy Production

West Virginia has historically placed heavy reliance on severance taxes and, of the states that impose severance taxes, West Virginia currently has one of the highest severance tax rates in the nation. However, due to environmental and other regulatory pressures, as well as low energy prices coupled with limited demand, the State’s revenues from severance taxes have seen significant declines in recent years. Consideration might be given to reducing the tax burden placed on those involved with natural resources in light of the retired workers compensation liabilities.

Tax Credits to Incentivize Infrastructure Investment and Energy Production

The legislature should consider incentivizing infrastructure investment in broadband and energy production in West Virginia through the use of carefully constructed tax credits, as has been successfully done in other states such as Virginia.

Clarification of Regulations Regarding Municipal B&O Taxes

West Virginia’s regulations relative to the imposition of Business & Occupation Taxes at the municipal level have not been revised in several years. The West Virginia State Tax Department should closely examine and update these regulations to ensure they reflect the realities of the modern economy and do not dissuade businesses from engaging in commerce in the state.

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Issue

The United States Congress is considering H.R. 1423, the “Forced Arbitration Injustice Repeal (FAIR) Act,” which would effectively ban the use and availability of pre-dispute arbitration agreements.

Background

Arbitration is a common dispute resolution method between businesses, employees and consumers that has been in use for nearly a century. Arbitration is a less-costly method of dispute resolution for all parties involved and is fair and effective. Arbitration is also a much speedier process than litigation where the parties must often wait months or years before a judge can schedule a trial. Finally, both parties get to choose a neutral arbitrator from a panel of available arbitrators and they can often select an arbitrator with expertise in the area of law at issue; unlike courts where judges are assigned with little input from the parties and sometimes with no expertise on the law at issue.

The United States Supreme Court has made it clear that where parties have agreed to arbitration to settle disputes, those agreements are binding and will be enforced. In addition, the courts have set forth various protections and obligations that must be followed to protect employees when it involves the arbitration of employment law disputes. Arbitration agreements tend to keep the courts from being flooded with disputes that can otherwise be settled in a fair and less-expensive manner, leaving the courts available to address more serious cases and criminal cases where the US Constitution guarantees the right to a speedy trial.

The FAIR Act that is under consideration by the U.S. Congress would effectively eliminate this form of dispute resolution.

The Chamber's Position

The West Virginia Chamber of Commerce opposes the FAIR Act and believes that arbitration should remain as an option for dispute resolution. Arbitration only occurs when all parties previously agree to use that as a method of dispute resolution – if a dispute were to arise in the future. Eliminating this as an option will simply mean that any disputes must be handled in the court system, which will typically take longer and be much more expensive for all parties involved.

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Issue

Should the United States Congress approve the United States-Mexico-Canada Agreement (USMCA), which is an updated trade agreement with Mexico and Canada that would replace the North American Free Trade Agreement?

Background

The United States, Mexico and Canada have all been part of the North American Free Trade Agreement (NAFTA) for the past twenty-five years. Following his inauguration in 2017, President Donald J. Trump announced that he planned to negotiate with Mexico and Canada on a new trade deal that would ultimately replace NAFTA.

The resulting deal that has been negotiated makes several changes to trade in North America. According to the U.S. Chamber of Commerce, the key aspects of the USMCA are that it:

• Grows digital trade by creating best-in-class rules to foster U.S. growth in the digital economy for firms of all sectors and sizes. It guarantees the freedom to move data across borders and prohibits the forced localization of data, thereby ensuring continued growth.
• Protects intellectual property for the full range of patents, copyrights and related rights, trademarks, designs and trade secrets. It also includes strong enforcement tools to guard against counterfeiting and piracy – promoting continued U.S. innovation that supports and creates well-paying jobs.
• Strengthens agriculture trade by establishing modern, science-based sanitary and phytosanitary standards that are the strongest achieved in any trade agreement. It provides transparency and information sharing on measures impacting trade in the products of biotechnology.

The Chamber's Position

International trade is a vital part of West Virginia’s growing economy. According to the Office of the United States Trade Representative (USTR), West Virginia exported $8.1 billion goods to the world in 2018, and data from 2016 shows that global exports support approximately 26,000 jobs within the state. Canada, one of the three countries within the USMCA, is West Virginia’s largest market for exported goods, representing 16% of the state’s total exports.

Data from the USTR shows that 1,047 companies exported goods from West Virginia in 2016, and of those, 805 meet the federal definition of a small business with less than 500 employees. The exportation of goods from West Virginia is also geographically diverse, with the following metro areas of the state having exports greater than $30 million a year: Huntington, Parkersburg, Charleston, Wheeling, Weirton, Morgantown and Beckley.

The West Virginia Chamber of Commerce urges the state’s Congressional Delegation and the entire United States Congress to support the United States-Mexico-Canada Agreement.

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