West Virginia

Rating:Trailing

By law, West Virginia’s State Tax Department evaluates four specific tax incentives every three years.^a These studies do not include all of the state’s tax incentives but could serve as a starting point to a broader evaluation process.

The Tax Department’s evaluations provide data on the cost of the incentives as well as the number of new jobs at participating businesses. The department also compares the rate of employment growth at businesses in incentive programs to industrywide trends.^b Those comparisons hint at a key consideration for measuring the economic impact of incentives: whether they are causing businesses to create jobs or make investments that go beyond what they would have done without the assistance. The evaluations do not use that data to draw conclusions about the effectiveness of the incentives, however; the Tax Department lacks a clear legislative mandate for that type of more rigorous analysis.^c The studies also do not include recommendations on how the programs can be improved.

In recent years, West Virginia has eliminated some tax incentives as part of an effort to simplify the tax code while lowering tax rates.^d  Still, the state has some major incentives that are not part of the evaluation process, such as a 24.5 million-a-year property tax break that is designed to encourage manufacturers to expand their facilities.^e

Unlike many other states, such as Maine, Oklahoma, and Washington, West Virginia does not require that new tax incentives be evaluated.^f For example, 2012 legislation created incentives for chemical plants that could potentially cost hundreds of millions of dollars if an eligible facility locates in West Virginia.^g By adopting a systematic evaluation process that includes any new incentives lawmakers enact, West Virginia could begin to produce high-quality information on the results of all of the state’s incentives.

Endnotes

1. West Virginia State Tax Department, “West Virginia Tax Credit Review and Accountability Report” (Feb. 1, 2015), 5, http://tax.wv.gov/Documents/Reports/TaxCreditReviewAndAccountabilityReport.2015.pdf.
2. Ibid.
3. For example, see West Virginia Code § 11-13S-10, http://www.legis.state.wv.us/wvcode/ChapterEntire.cfm?chap=11&art=13S&section=10#13S#13S.
4. West Virginia State Tax Department, “West Virginia Tax Credit Review,” 23.
5. West Virginia State Tax Department, “West Virginia Tax Expenditure Study” (January 2015), 137–38, http://tax.wv.gov/Documents/Reports/TaxExpenditureStudy.2015.01.pdf.
6. Maine Rev. Stat. tit. 3, § 998, http://www.mainelegislature.org/legis/statutes/3/title3sec998.html; Oklahoma Stat. § 62-7004, http://webserver1.lsb.state.ok.us/OK_Statutes/CompleteTitles/os62.rtf; Washington Rev. Code Ann. § 43.136.045, http://app.leg.wa.gov/RCW/default.aspx?cite=43.136.045.120.
7. West Virginia Center on Budget and Policy, “Issue Brief: Cracking the Cracker Bill” (Feb. 3, 2012), http://www.wvpolicy.org/downloads/cracker_brief021312.pdf.