Skip to main content

Background Image for Header: West Virginia scenery

TPP White Paper Introduction

1. Introduction

The taxation of tangible personal property 1 in West Virginia – hereinafter TPP – has been a recurring theme in economic opportunities studies that examine the state’s potential for growth and economic competitiveness over the past few decades (Capehart et al., 1999; West Virginia Department of Revenue 2006; West Virginia State Tax Department 2009; McKinsey & Company 2017; West Virginia Chamber 2018; O’Leary & Boettner 2010; Tuerck, Bachman, & Conte 2016). In West Virginia, TPP mainly comprises machinery and equipment, inventory and motor vehicles. West Virginia is in the minority of states that still tax business inventory (McKinsey & Company 2017). It also imposes TPP taxes on motor vehicles and business machinery and equipment. TPP taxes on motor vehicles are perhaps the most unpopular of all levies since they impose a high burden on taxpayers who are required to make annual payments on a depreciating asset (Brunori 2016).

Some industry and business leaders and economic development professionals report that TPP taxes are impediments to business growth, attraction and retention and that they disincentivize capital investment. If a business invests in newer and more productive equipment or plans for growth with increased revenue, it pays more in TPP tax. This has reportedly resulted in a chilling effect on investment, loss of business to more favorable tax treatment across state lines, and failure of new businesses to continue to explore West Virginia as a potential location after discovering the state’s outlier status. State business recruiters maintain that the elimination of such taxes would make the state more competitive and more capable of encouraging companies to relocate to West Virginia. 2

For the 2018 tax year, TPP tax revenues in West Virginia amounted to $523.9 million – including both business and individual (WV State Tax Department 2018). The revenue generated from the taxation of TPP accounts for a third of the state’s property tax base, although this ratio significantly varies by county (See addendum; State-by-State Property Tax 2018). TPP taxes are a source of funding for counties, school districts, the state school aid formula and municipalities. In some cases, they constitute the largest source of revenue (State-by- State Property Tax 2018; Tax Commissioner of West Virginia 2017).

Some reports 3 that seek to improve the state’s tax structure recommend the elimination of TPP, which, in theory, would improve the state’s business climate and make West Virginia more competitive in the regional, national and international markets. Two of the reasons for this recommendation are worth mentioning: 

  1. TPP taxes are at odds with classic tax policy principles; and 
  2. since TPP is movable, such taxes might not be the most optimal way of raising revenue because they might be more easily evaded. 

The findings of such studies, however, are sometimes inconclusive or contradictory, allowing for different interpretations.

At the same time, TPP tax revenues in West Virginia have decreased over the past couple years, so what individuals, businesses, schools and local governments stand to lose or gain from a potential reform, repeal or by preserving the current tax system is also uncertain. Given the fact that TPP taxes are sources of revenue for local governments and state school aid formula calculations, effects of modification or repeal may be analyzed to understand how offsets impact the state’s General Revenue Fund. The goals of this working document are to highlight some of the trade-offs and challenges West Virginia may face in allocating sufficient revenue and achieving fiscal stability while striving to enhance state competitiveness and to offer insights on potential approaches to reform (Porter 2012).

Table 1 provides an overview of TPP tax policy across the 50 U.S. states and Washington D.C. in terms of the three main categories of TPP taxation: motor vehicles, inventory and machinery and equipment. 4

Table 1. State-by-State: Tangible Personal Property Tax 5 . Types of Taxes for each state.
State Motor Vehicles Inventory Machinery and Equipment
Alaska % % %
Arizona %
District of Columbia
Georgia % %
Massachusetts %
Michigan %
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota 
Rhode Island
South Carolina
South Dakota 
West Virginia
2. Classic Tax Policy Principles and TPP →

Be part of something bigger.

We want to hear from you. Share your ideas. Stay informed. Help us move West Virginia Forward.

WVU logo West Virginia Seal Marshall University logo

Contact Us

*Citations available upon request.