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The Status of TPP in West Virginia

4. The Status of TPP in West Virginia

In 2009, West Virginia ranked fifth in the nation in TPP tax collections per capita –  $245/capita (Errecart, Gerrish, & Drenkard 2012). As previously mentioned, TPP tax revenues are sources of income for municipalities, counties and county boards of education (State-by-State Property Tax 2018; Tax Commissioner of West Virginia 2017). During the 2018 tax year, the revenue generated from TPP taxes in West Virginia was $523.9 million – including both business (e.g., inventory, machinery and equipment) and individual (e.g.,  motor vehicles). Table 2 includes the distribution of property taxes levied by purpose in tax year 2018.

Table 2. Personal Property Tax Revenues in West Virginia 2018 Tax Year
Purpose Percentage Collections
State 0.4% $2,208,575
County 27.2% $142,371,751
Schools 65.3% $342,119,564
Municipal 7.1% $37,282,768
Total 100.0% $523,982,658

As Table 2 illustrates, over 65 percent of West Virginia’s TPP tax revenues are included in the school aid formula. Losses to that funding stream, without proper replacement, could put pressure on municipalities and counties to try to supplement current funding. Municipalities and counties combined currently receive 34 percent of TPP tax revenues. The loss of that revenue, without a dependable source(s) of replacement revenue, could preclude any possibility of them contributing additional funds to the school aid formula. The state’s loss of  $2 million is marginal in comparison, but it would need to find ways to replenish the $342 million loss to education funding. Additionally, a potential reform or repeal of TPP taxes would have an unequal impact on counties, since some rely more heavily on these revenues than others. For instance, in eight of the 55 counties, TPP tax revenues exceeded real property collections in tax year 2018 (See appendix).

As of mid-2016, 13 states, including West Virginia, 11 levy TPP taxes on motor vehicles, such as airplanes, boats and cars (See table 1; Brunori 2016). The TPP tax on motor vehicles is unpopular among taxpayers because it incurs recurring expenditures on a depreciating vehicle and imposes a high burden on individuals, 12 especially on purchases of new vehicles which, according to dealerships, negatively affects car sales (Brunori 2016). Many states have opted to tax such properties through a motor vehicle excise tax 13 (Errecart, Gerrish, & Drenkard 2012). Alternatively, some states charge an annual registration fee/tax in lieu of TPP taxes on motor vehicles (Bloomberg BNA 2018).

Since changes to the state tax structure can be complex – given the intricate interaction among exemptions, credits, deductions, rates and levy limits and the resultant shift of the tax burden – it is important to look at examples from other states (Collins 2015). Of the states that border West Virginia, Kentucky, Maryland, and Virginia have various forms of TPP taxes, whereas Ohio recently replaced its TPP taxes with an alternative levy. While not a West Virginia border state, Michigan also recently eliminated its TPP taxes with differing results from Ohio.

5. Phase Out of TPP in Ohio and the Commercial Activity Tax →

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