Even as "insiders" in the manufacturing industry, it's hard to keep track of all the plant changes, mergers, acquisitions and closings at times. In fact, with everything that West Virginia has to offer growing chemical companies (e.g., available land, skilled workers, etc.), why is there so much change and turnover in the first place?

It's a complicated question to be sure and one that has many answers. However, the bottom line literally rests on the bottom line. If plants can't turn a profit in West Virginia, they leave, potentially displacing hundreds of employees in the process.

What can be done? Some say the issue lies in West Virginia's current tax structure, citing that it's not "business friendly" in its current form. In fact, tax reform has become such a priority for the state that Governor Manchin called a special legislative session in November to address the issue.

In an effort to learn more about tax reform and how it can affect the manufacturing industry, we interviewed Mike Caryl, former West Virginia tax commissioner and partner in the law firm of Bowles Rice in Martinsburg. He stated that West Virginia's tax structure is unfavorable to the manufacturing industry because it imposes a far heavier burden on capital investment than in many other states.

"That burden is manifested most significantly through the business franchise tax and the personal property tax on machinery, equipment and inventory," said Caryl. "The process by which taxes are assessed on manufacturers' property is often arbitrary and unpredictable - resulting in the kind of instability and risk that discourages new capital investment."

Caryl added that manufacturers in West Virginia are often further burdened by the local business and occupation tax on gross receipts. "Although that tax was repealed at the state level 20 years ago because it discouraged business investment and job creation, it remains one of the few revenue sources available to municipalities," said Caryl. "By taxing gross values added, and gross receipts from transactions made, outside of the municipality, the tax puts affected manufacturers at a severe disadvantage when competing with out-of-state manufacturers."

According to Caryl, the first step to meaningful reform is an immediate repeal of the business franchise tax. "The tiny reduction in the rate of that tax, approved in the recent special session, virtually ignores that tax's punishment of jobcreating capital investment," he said.

Second, Caryl recommends that all industrial personal property should be exempted from property tax. Since that would require a constitutional amendment and would adversely affect local government revenues, an alternative would be to give manufacturers a credit against state business taxes for the amount of personal property tax they paid. However, as long as tax is imposed on manufacturers' personal property, Caryl suggests the state tax department be required to both faithfully honor the legislature's intent in applying tax relief provisions, and otherwise uniformly apply standard appraisal methods to its assessments of such property.

Finally, Caryl recommends that West Virginia municipalities (and counties) be given more options and flexibility in raising revenue. "This can be done by allowing municipalities to impose, in lieu of the business and occupation tax, local sales and income taxes at approved levels to be added to and collected with the state versions of such taxes," he said. "By allowing local governments to piggy-back on state taxes, the efficiency of collection and administration will be maximized, and the oppressive burden of the business and occupation tax can be lifted."