Incentivizing Capital Improvements through West Virginia Tax Reforms

Public Policy Foundation of West Virginia pic

Public Policy Foundation of West Virginia
Image: ppfwv.org

As the president of West Liberty University from 2007 to 2015, Robin Capehart oversaw sustained administrative development and growth initiatives. Increasing West Liberty University enrollment, he also enlarged the degree and certificate programs in ways that attracted returning adult students. With a background as an attorney, Robin Capehart has also been at the forefront of tax reform efforts as West Virginia’s Secretary of Tax and Revenue.

In a 2015 interview, Mr. Capehart gave an example of the need for business tax reform that lessened the burden for capital expenditures on companies. A business that held a $120,000 piece of machinery for seven years would hypothetically get the value down to $30,000.

However, purchasing a new piece of equipment at the same price would raise taxes paid to those due on equipment valued at $120,000. With the taxed value of the equipment declining only gradually, this provides a distinct disincentive to modernize. The key, then, is to get the business tax system beyond one devised in the 1930s and reflect transitions that have taken the economy from one based primarily on agriculture and natural resources to one centered on manufacturing and services.

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The Need for Tax Reform in West Virginia

Tax Reform pic

Tax Reform
Image: theet.com

A JD graduate of West Virginia University with an LLM in taxation from Georgetown University, Robin Capehart served for eight years as the president of West Liberty University. Since departing West Liberty in 2015, Robin Capehart has functioned as a consultant on several public policy issues, continuing his work as a strong advocate of tax reform.

Mr. Capehart has offered insight on matters of taxation to the West Virginia state legislature for several years, previously serving on the Governor’s Commission on Fair Taxation. As the chairman of the commission, he was one of the primary authors of a groundbreaking report analyzing the history and efficacy of the West Virginia tax code. Co-authored by vice-chairmen Cal Kent and Michael Caryl, the extensive report concluded that the state tax code suffered from an unnecessary degree of complexity, abundance of exemptions, and generally regressive slant.

West Virginia’s tax structure was once well-suited to its manufacturing-focused economy. However, as service delivery companies have grown to comprise a larger portion of the state’s business landscape, many elements of the tax code have become outdated. The 1999 report by the Governor’s Commission on Fair Taxation outlines the need for a tax code with a broader base and lower rates. The report also highlights the detrimental impact that taxes on inventory, machinery, and equipment can often have on manufacturing companies, at the same time noting that many local governments rely heavily on this form of tax revenue.

Efforts to modernize West Virginia’s tax structure have persisted throughout multiple congressional sessions. The state legislature recently met for a special session in the summer of 2017 to finalize several budgetary concerns, including tax provisions. However, the body did not come to an agreement on tax reform, leaving the issue on the table for future legislative sessions.

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.

AAA Rolls Out New Three-Person Panel Guidelines

American Arbitration Association pic

American Arbitration Association
Image: adr.org

Throughout his career Robin Capehart has served as an attorney, consultant, tax reform advocate, and president of West Liberty University, near Wheeling, West Virginia. In addition to his experience as a litigator and executive, former West Liberty president Robin Capehart served as a member of the Panel of Arbitrators with the American Arbitration Association.

The American Arbitration Association recently rolled out a new set of rules and guidelines parties can use when they are required to have a three-party panel of arbitrators to preside over a case. Under the new system, each party in the case works with a single member of the panel throughout the bulk of the process, meeting only with the full three-member panel when evidence is to be presented or the final award is handed out.

There are two different tracks that can be used in the new guidelines. In the first option, the parties work together to choose the entire panel, with one member appointed to serve as chair. The chair will be the primary arbitrator during the early phases of arbitration. The second option allows parties to select only one arbitrator who will, again, handle all the procedures in the early stages of the case. Later, the parties will coordinate with AAA to seat the other two members of the panel no less than 60 days prior to any hearings in which the full panel needs to be assembled.