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Official defends state tax incentives

CHARLESTON, W.Va. -- West Virginia Commerce Secretary Keith Burdette defended the state's use of tax credits to attract businesses to the state before lawmakers Wednesday.

Speaking to a joint meeting of the Legislature's Joint Commission on Economic Development and Joint Committee on Finance, Burdette criticized a recent New York Times report for creating a "woefully inaccurate picture" of how the state uses its business tax incentives.

The Times reported that West Virginia spent more per person on business tax credits and incentives than all but one other state, Alaska.

Burdette said he has spoken with state tax officials about the data used in the Times' report. While the data was pulled from a variety of reports published over the years, Burdette said it did not accurately reflect how the state uses its tax programs.

"The article was poorly researched, the comparisons poorly made," Burdette said. Lawmakers have been researching ways to boost transparency surrounding the state's business tax credit programs during committee meetings this year.

Some have complained state officials don't provide enough details regarding the number of businesses using particular incentives, how many jobs are created and how much tax revenue the state loses through the programs' use.

House Finance Chairman Harry Keith White, D-Mingo, said lawmakers would like to develop some type of evaluation system to figure the cost of incentive programs and whether the results are worth keeping them on the books.

"We need to know whether there are more effective incentives to promote job growth here," White said.

"Ultimately, I would like to see a permanent mechanism put in place to monitor these incentives and make recommendations for changes as needed to keep West Virginia's economy moving forward," he said.

Burdette said the state

Development Office, Workforce West Virginia and the state Tax Department can offer three types of business assistance: financial assistance through loans and bond sales; tax incentives, including credits and sales tax exemptions; and workforce recruiting and training assistance.

He said all of these programs are designed to be results-driven.

"Every one of them are performance based — if you don't perform, you don't apply," Burdette said.

The New York Times said West Virginia spends about $1.57 billion annually on business incentives.

The single largest tax incentive was a $1.17 billion annual sales tax exemption for manufacturers and other firms to purchase equipment and goods used in production or other business activities.

Burdette said it was misleading to include that exemption in the total. He said virtually all states have that exemption, but the Times did not include that data for other states.

"The writer did not compare apples to apples. The analyses were incomplete at best and created a woefully inaccurate picture," Burdette said. "It's clear it is a picture not well painted by the New York Times."

Burdette also said the data for that exemption was taken from the 2009 tax year, which saw a spike in equipment purchases for state power plants.  

"The only reason our value was particularly high was that it was partly contributable to pollution control efforts made at power plants," he said. "That threw our numbers off substantially."

Burdette said the state Tax Department grants about $32 million in tax credits to businesses annually.

But Burdette agreed the state needed a regular, systematic review of its tax policies to make sure it is working as efficiently and effectively as possible.

"I would certainly agree that all of our programs should be, as they have in the past, be reviewed and revised," he said. "There will always be, I believe, a need to add programs and a reason to cancel them, as long as we offer them."

Officials at the West Virginia Center on Budget and Policy, a non-profit, liberal-leaning think tank, have been critical of the state's lack of transparency in reporting data on tax credit programs.

While they agreed the Times data had flaws, they said it was more information than state officials have been willing to provide over the years.

"The Times may have painted a bad picture, but in West Virginia we haven't painted anything at all," said policy analyst Sean O'Leary. "It's just a blank canvas."

Contact writer Jared Hunt at jared.hunt@dailymail.com or 304-348-5148.


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