State Senate President Bill Cole wants Governor Tomblin to call a special session of the Legislature later this year to work exclusively on tax reform. “I’ve already talked to the Governor about it,” Cole told me on Metronews Talkline Monday. “I’ve encouraged him to consider a special session so that legislators could come in and consider a single piece of legislation.”
Governor Tomblin may need more convincing. Tomblin spent 36 years in the Legislature before being elected Governor and has sat through his share of fruitless special sessions. He would need concrete assurances before the call that Legislative leaders have agreement on the changes.
That means the next few months are critical as Cole and others try to structure tax reform and build consensus. Much of the legwork will fall to a joint committee that the senator says will meet “as early and often” as necessary to develop a plan.
Cole has already consulted the primary authors of the 1999 study by the Governor’s Commission on Fair Taxation—chairman Robin Capehart and vice-chairmen Michael Caryl and Cal Kent—to get their thoughts. Their nearly 1,000-page report determined that the overall state and local tax structure in West Virginia is regressive, overly complicated, riddled with exemptions and still geared to an early 20th century economy.
The report concluded that West Virginia would benefit from a tax code that has a broader base with lower rates, reflecting the shift from manufacturing to services and giving more flexibility to local governments to generate revenue.
The state has taken some positive steps since the report was issued. For example, the business franchise tax has been eliminated and the corporate net income tax has been reduced from 8.5 percent to 6.5 percent.
However, the state still collects the anti-business personal property tax on inventory, machinery and equipment, which the 1999 study said put West Virginia businesses at a competitive disadvantage, but is important for local governments. They annually collect roughly $70 million in business inventory property taxes and roughly $250 million or more in property taxes on machinery and equipment.
Sweeping tax reform would be extremely controversial, even if the goal is to remain revenue neutral. Any entity that believes its tax burden will increase will fight to protect its interests, which is understandable. Cole is unafraid of the fight, even though it would come with the approaching 2016 election.
“There’s no time like the present,” Cole told me. “I might suggest that doing the right things would be a good way to get re-elected and not run away from things that might be a little controversial, but need doing.”
Having a special session to work just on tax reform makes sense. Lawmakers can drill down on the complexities of that one issue while skipping the horse trading involving unrelated bills that’s inevitable in a regular session.
But a lot of work remains to be done before that can happen, including persuading Governor Tomblin to risk a special session at taxpayer expense on a complicated and controversial issue.