West Virginia:
A BRIGHT SPOT AMID GLOBAL ECONOMIC DOWNTURN
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Like all states, West Virginia has faced tremendous challenges in the last few years and I’m proud to say that, working together with people from all sides of the table, we have been able to better position our state to weather the global economic storm that has caused hardship for almost every budget — in government, in our households and in the private sector.
We’ve made tremendous strides in building a business climate that’s more attractive for new businesses and more prosperous for existing companies. It’s taken the support of the Legislature, local and national leaders, labor, business and industry, and private citizens who all agreed we had to make changes now if we expect West Virginia to lead in the future.
As I write this, I’ve been reading news reports about states that at the end of their fiscal years are struggling to pass their budget bills. Other states are facing such crippling deficits they are laying off or furloughing state workers, cutting government services and-or raising taxes.
West Virginia is one of only a handful of states not in that position. We’ve been responsible in managing our finances and capitalizing on our growth in recent years. We’ve also worked diligently to find opportunities to diversify our economy, build our education system and train our workers for 21st century jobs.
As I’ve said many times about this recession, we will not go unscathed. There’s no doubt we are seeing the effects of the global recession in our state every day. Sadly, we’ve seen the closing of some longtime plants and I’ve spoken with a great many hard-working West Virginians who are concerned about whether their next paycheck is guaranteed.
Because of the measures we’ve taken, however, I honestly believe West Virginia will come out of this recession stronger than almost any state and better prepared to take advantage of new opportunities when the national economy rebounds. Here are some recent examples of why I believe this:
West Virginia had the nation’s 11th-highest personal income growth rate between the fourth quarter 2008 and first quarter 2009, and West Virginia is one of only two states that had five consecutive quarters of positive personal income growth. West Virginia also has ranked consistently in the top 20 in personal income growth since first quarter 2008.
We have had more than $8.8 billion – that’s billion – in new business investments since 2005. The state’s total economy grew at a rate of 2.5 percent in 2008, ranking us as sixth-best in annual growth rate. And, last year, our exports grew 41 percent, outpacing the national growth rate of 12 percent.
We’ve also lowered taxes in a responsible manner that has allowed us to grow while not upending our budget, and without cutting essential in new business government services.
Since 2006, we’ve lowered both the business franchise tax rate and the corporate net income tax rate. Once the business franchise tax and corporate net income tax rate reductions are fully implemented, we expect businesses to save roughly $200 million per year.
West Virginia has strived to promote additional business investment during this period of economic recession by adopting federal stimulus tax changes, as well. Qualified small businesses may fully expense up to $250,000 of capital investment for state income tax purposes in both 2008 and 2009. Most other states do not allow these accelerated business investment income tax deductions.
When a small business owner is looking to grow, no opportunity should be overlooked. Small businesses are the backbone of our economy. Their local ties and unique perspective are part of the reason why West Virginians are weathering the global economic storm as well as we are.
One opportunity West Virginia is now offering comes in the form of a tax credit for those small businesses that expand their employee base. Eligible small businesses that create fewer than 10 new jobs can receive a tax credit of $3,000 per year, for a period of five years, for each new job created. To qualify, the new jobs must be full-time and pay a minimum salary of $32,000 and must offer health benefits, and one or more other benefits.
Other credit options may apply to eligible small businesses as well as larger eligible businesses. Eligible markets include manufacturing, warehousing, goods distribution, information processing, destination tourism, and research and development. This credit is designed to bring high-quality employment opportunities to West Virginians—whether they are homegrown by a local entrepreneur or they come from a new company choosing to locate in our great state.
We continue our efforts to bring new opportunities to West Virginia. In the next three years, two-thirds of the Fortune 1000 companies will be looking for a location for their data centers, sometimes called “server farms.” Given our competitive position and low energy costs, we see this as a target industry and we are working very hard at those prospects. The location of data centers in West Virginia would create 21st century jobs that pay well and will help to diversify our economy.
During a recent special legislative session, West Virginia took a big step toward encouraging the high-tech branches of Fortune 1000 companies and Internet-based businesses to locate here. The High-Technology Business Property Valuation Act allows the value of personal property directly used in a high-technology business or in an Internet advertising business, for taxation purposes, to be valued at its salvage value.
For instance, if a Web site design and development firm purchases new computers to conduct its business, those computers are valued at 5 percent of original cost for purposes of the property tax, thereby lowering the amount of tax the business pays on the property each year.
This tax break provides eligible businesses in West Virginia with an edge over their competition in other states. Additionally, high-technology businesses and Internet advertising businesses are exempt from sales and use tax on purchases of certain items directly used in their business.
These are but a few examples of how West Virginia is changing to succeed in a global economy. We have made responsible decisions to place us on a much more solid financial footing today, so we are in a better position to handle these economic challenges now and reap the rewards as our national economy rebounds.
Working together — and, as always, in close partnership with U.S. Senator Robert C. Byrd and the other members of our delegation in Washington — we will continue this success and foster West Virginia’s rise to national leadership.
It’s not possible in one article to cover all the emerging opportunities we see in West Virginia’s future, so I encourage all who read this to follow the latest developments at wvopenforbusiness.com.
Joe Manchin is West Virginia's 34th Governor
