West Virginia and Other States Work to Modernize Tax Systems

 

Robin Capehart

With experience in law, academia, and tax policy, Robin Capehart spent eight years as the president of West Liberty University in West Virginia. An advocate for tax reform, Robin Capehart has worked to draw attention to West Virginia’s outdated tax structure, stating that it fails to reflect the state’s shift from manufacturing to a service-based economy.

As with other states across the country, West Virginia has struggled to align its tax code with the modern service economy. The state’s current tax structure—geared toward the economy of the early 20th century—places a heavier tax burden on manufacturing-oriented businesses while allowing service delivery companies, which account for more than two-thirds of the nation’s economy, to fall through the cracks.

This imbalanced system leads to budgetary shortfalls that affect the ability of local governments to cover the cost of infrastructure and public services. In 2017, lawmakers in nearly two dozen states, including West Virginia, attempted to reform the tax code and institute a sales tax on professional services. Although the proposed reforms in West Virginia and other states included revenue-neutral cuts, all of them failed to pass.

The failure of West Virginia and 22 other states to pass measures imposing taxes on services demonstrates the challenges that state governments face in attempting to broaden the tax base. Despite these challenges, however, states such as West Virginia will still have to find a way to update a tax structure that is based on an old economic model.