Published: March 07, 2008 10:09 pm         

Democrats vote on slowed tax cuts for state’s businesses

CHARLESTON — If tax reform is the economic development engine, the question is, how fast do you drive it?

Democrats stuck together Friday for a slower model, beating down Republican amendments in the House to kick cuts in the corporate net and business franchise taxes into a faster gear.

Minority Leader Tim Armstead, R-Kanawha, wanted to remove the “triggers” that would stall scheduled cuts in the business taxes, depending on the status of the Rainy Day Fund.

“There must be a comfort level in those who are seeking to create jobs and seeking to expand their businesses,” he maintained.

But each GOP amendment failed on largely partisan votes before the House cleared an amended version of SB680 — one that wiped out the “Caruth amendment” for a year-by-year rollback in the corporate net tax.

Senate Minority Leader Don Caruth, R-Mercer, coaxed the Senate two weeks ago to cut the net tax each year rather than freeze it.

Senate Economic Development Chairman Brooks McCabe, D-Kanawha, warning that dark clouds are gathering on the economy, preferred no tax reduction in 2010 and 2011, but the Caruth amendment would have sliced the existing 8.75 rate to 7.5 percent in 2010 and 7.0 the following year. The Senate was prepared to accept the amended House version.

By 2012, the corporate net would have stood at 6.5 percent, but not hit that level under McCabe’s proposal until 2014.

Armstead said the Legislature needs to move with boldness to send business interests a signal that West Virginia wants their investment dollars.

But Delegate John Doyle, D-Jefferson, speaking for the majority party sentiment, said a slower approach is needed to convert a tax structure that worked well for the 19th century but has outlived its purpose.

“You can’t just throw the whole darn thing out and say reduce taxes and say everything will be hunky-dory,” Doyle said.

“Everything will not be hunky-dory. Almost everything will be something very different from hunky-dory.”

Armstead failed in another amendment aimed at wiping out the business franchise tax, one that McCabe recently called “the most onerous tax” of all, but this one likewise failed on a lopsided vote.

Armstead called the tax “an absolute job killer,” adding, “This is the one that gets them.”

In his efforts to accelerate business tax cuts, Armstead often pointed to this year’s $290 surplus, saying it makes more sense to invest that in tax cuts that would encourage more business, and, in turn, broaden the tax base, thus providing the state more money than it would lose by trimming the tax structure.

Delegate Craig Blair, R-Berkeley, had viewed the tax bill a night earlier as “wonderful” until he learned the inventory tax reform didn’t include equipment, so he tried in vain to add this with an amendment, saying it is needed to inspire manufacturing jobs.

Across the border in other states, Blair told the House, workers pocket $10,000 more annually, and he attributed that to a tax structure more conducive to jobs creation.

“I’m not here to represent industry,” he insisted. “I’m here to represent West Virginia workers.”

Finance Chairman Harry Keith White, D-Mingo, strongly defended the tax package, pointing out the combined reporting feature would generate $30 million to $50 million on the back side while gradually phasing down taxes that have been a burden on businesses for decades.

White said the Rainy Day Fund has between $575 million and $580 million. If a major reversal means the fund must be dipped into, the “triggers” go into effect at the 10 percent level, and that means any planned cuts in the corporate net and franchise taxes are put on hold, White said.

“I look at this as a jobs creation bill,” he added.