Small business revolution
What WV Can’t Wait For
We’ll make West Virginia the best place in America to live, work, and start a business. It’s time for our government to bet on our own people, our own communities, and our own entrepreneurs. We’re never going to be a giant, thriving metropolis, but that’s our strength, not our weakness. Instead of being the 50th state chasing Amazon or Wal-Mart or Rockwool–let’s be the first state to bet big on capital investments and protections that favor local entrepreneurs and small businesses, artists and farmers and cooperatives. That’s an economy we can win, and it’s a vision for how we diversify, bring our kids home, and make West Virginia not only a place people want to visit… but the best place for people to live.
Whose Side We’re On
- Local farms and farmers
- Local business owners dedicated to building community
- Family Businesses
- Local, family-owned union businesses
- Main Street
- Economic Development
- Small business owners
- An economy that favors local business
- New small business
… and more. Click the links above to read stories from the trail.
What We’re Up Against
The story of our economy is one where outside corporations come into our state, set up shop, buy off some politicians, and make a few folks rich. In some industries, these owners abandon us when the extraction boom goes bust. And in others, they pay us such low wages that we have to work three jobs to make ends meet. Either way, corporate CEOs undercut local business owners and treat our people like we’re disposable. In this way, out-of-state monopolies have turned almost every industry into an extraction industry. It does not have to be like this.
Out-of-state corporations are legally accountable to shareholders, not workers or communities. When they want to boost their stock prices, they cut jobs and wages. When they make money here in West Virginia, they take that wealth out-of-state. When they make decisions about us and our state, those decisions are made thousands of miles away.
Small businesses are the opposite. As they grow, they add jobs and raise wages. When they generate wealth locally, more of that wealth stays in local communities. When they make decisions about our state, those decisions are made in towns, hollers and on mountaintops, by our friends and neighbors–the people who know and care about us.
It is no wonder that small businesses create jobs at a faster rate than larger ones. Small businesses are also more resilient to booms and busts. Small businesses in West Virginia are cornerstones of our economy, especially in rural areas. According to the Small Business Administration, in 2018 the 114,391 small businesses in West Virginia employed about 280,213 people, or almost 50% of all West Virginia employees. About 100,000 of us are employed at businesses with fewer than 20 employees. The counties with over 75% employment by small businesses were among the most rural counties in the state. These included Pendleton, Wirt, Calhoun, Monroe, Mingo, Lincoln, Gilmer and Doddridge counties.
So if small businesses are so important, why are they struggling? The answer is they’re playing a rigged game. Banks won’t loan to them and regulations are stacked against them. Small businesses also struggle with the astronomical and rising costs of health insurance. Healthcare costs for companies increased by 5.5% in 2018-2019 alone, and are still growing. Small business owners are forced to watch as their elected representatives line the pockets of corporate behemoths, in the form of state and federal government tax breaks.
One example: the citizens of Jefferson County have roundly rejected the Rockwool insulation factory that’s being built less than half a mile from an elementary school. Thanks to a series of sweetheart deals, some estimate that Rockwool will receive more than $25 million in tax breaks from West Virginians. Imagine what that $25 million could do if it were invested in our own people.
Politicians in both parties have spent a generation choosing tax breaks for out-of-state companies over investments in our own small businesses and infrastructure. This strategy has failed.
- Invest in small business and capitalize 3,000 Small Businesses, Family Farms, Cooperatives and Entrepreneurs each year, at an average rate of $25,000. No one with talent, ability and drive should be prevented from starting a business just because they weren’t born rich. This program, partnered with a Public Bank of West Virginia and local community banks, could be accessed in a variety of ways: venture capital, forgivable loans, living stipends for artists and entrepreneurs, seed capital. Imagine 6 young artists setting up shop in your town, to start their own businesses and revitalize main street. Imagine hundreds of small farmers getting the capital they need to grow hemp, cannabis, and other new crops. Imagine hundreds of recent graduates getting the support they need right here at home to start tech companies and retail shops. Imagine senior citizens having the capital to save, expand, or transition ownership of flagging businesses. We’ll also ensure that every small business receiving capital must not exceed a 10:1 pay ratio for CEO : workers.
- Strengthen and streamline the Department of Commerce so that it’s run by small business owners and workers, and offers every small business owner in the state a simple, comprehensive checklist (how to start a business, how and when to pay taxes, how to avoid unnecessary fees) and a Small Business Advocate (a single point of contact available to help with any problem, and to provide necessary information in a timely, reliable way). The State has been moving in this direction over the last few years, but too many small business owners still feel burdened by paperwork. We will streamline the business registration and tax filing process until we offer the simplest system in the country.
- Shift tax breaks to small, locally-owned businesses, and away from their competitors. Work with the Department of Commerce to create a $75 million annual package of tax credits and incentives that are exclusively available to locally-owned small businesses (100 employees or less). The exact package of tax credits would be determined by small business owners, with a particular focus on reducing costs to be able to afford a raise in the minimum wage to $15. This could include some combination of:
- A tax credit that directly supports small businesses that offer healthcare benefits or who are impacted by the gradual raise to a $15 minimum wage.
- Pass a “right to repair” law in West Virginia, so that small businesses and consumers can repair their own devices without needing the permission of large corporations.
- Create a state-run merchant fee processing service through the State Bank of West Virginia to offer lower rates to locally-owned businesses and keep transaction fees here in West Virginia
- Tax credits for hiring people in recovery and ex-felons–in conjunction with our Recovery Jobs Program.
- A subsidy on workers’ comp premiums for small businesses headquartered in West Virginia that have fewer than 100 employees.
- A set of renewable energy tax credits for small businesses that use wind or solar, so they can achieve long-term savings.
- A tax credit exclusively for small businesses that wish to develop downtown properties (to avoid property tax spikes). See more in our Homestead Act plan.
- Creative ways to drive state contracts and large private sector contracts to local small businesses.
- In public procurement, RFPs and RFQs, increase the credit local companies get in the bidding process. In instances where no local companies are bidding, insist that other contract bidders disclose the minimum percentage of the contract that they pledges to re-spend here in WV. Those that promise higher in-state spending would receive credit for the additional benefits they generate for the state.
- A pilot program for a Rural Entrepreneurs Basic Income project.
- “Shop Local Saturdays,” support for periodic Sales Tax Holidays, exclusively available to locally owned, small businesses.
- With cost-benefit analyses, determine the best ways to help small businesses transition to more remote work, more online business, more drive-through/take-out, more socially-distanced work, and more investments in worker safety.
- Re-write state regulations to create a level playing field for local businesses.
- Open up existing state grants for business development to more sectors than just the manufacturing industry. Pass stricter anti-steering and anti-trust laws across sectors.
- Make West Virginia the best place in America for worker-owned cooperatives and other companies that promote a “stewardship ownership model” (purpose trusts, employee-ownership models, and B Corps). We want to encourage all companies that go the extra mile to keep wealth in our communities and in our workers’ pockets. This would include streamlining legal barriers for these companies and setting aside a portion of the small business development funds for these companies.
- Make West Virginia the best place in the country for small breweries, local wine sellers, and distilleries. We will end the practice of double-taxing local breweries and sellers, allow wine sellers to sell by the glass, and give these companies more freedom in choosing their distributors.
- Make West Virginia the best place in the country to start and run a cottage business by simplifying reporting and relaxing regulations for small producers of local crafts and produce.
- Make Home Rule a permanent program so that cities have the flexibility to create small business incentive programs that they would not be able to create otherwise.
- Support people receiving unemployment benefits to join the workforce by starting their own businesses through a training program similar to New Hampshire Pathway to Work program, and make sure those benefits are not jeopardized while the business owner is not yet receiving a salary.
- Raise the limit on the amount a small business can raise through WV crowdfunding laws, from $1 million to $20 million, to allow West Virginia entrepreneurs and small business owners as much access to relief funds as possible
- Allocate $50 million from the Rainy Day Fund for a one year tax holiday for WV small businesses struggling from the impacts of the pandemic. We will develop metrics to properly target this tax holiday, for example by requiring the businesses to have less than a 10:1 CEO/owner to lowest-paid-employee pay ratio, or to have less than a certain amount in net or gross profits, or less than a certain amount of federal taxable income, or to be in a community/neighborhood where few other businesses exist—or some combination of these.
- Support a universal Paid Family and Medical Leave program that covers leave for small businesses and independent workers.
- Invest in roads and broadband to build a state where workers and companies want to move, and where we are constantly growing the next generation of entrepreneurs, because good infrastructure helps attract and grow all types of businesses, including small businesses. See our full plans to Fix the Roads, and expand Broadband for details.
- Reduce healthcare costs for small businesses. See our plan to Cut Healthcare Costs for West Virginians, to learn more about our promise to fight insurance companies through an Insurance Commissioner, create a state Prescriptions Benefits Manager to compete with Big Pharma and drive the costs of prescriptions down, and advocate for Single Payer health care at the federal level. Until we get a national healthcare system, we’ll push for an affordable state buy-in option to Medicaid or PEIA, and/or ensure that small employers can access the reduced rates negotiated by PEIA (as originally provided in SB 143 of 2004) and lower other small business insurance costs by offering low-cost casualty insurance coverage for small businesses through the West Virginia Board of Risk and Insurance Management (BRIM).
- Start a State Bank to offer greater access to capital for small businesses and infrastructure projects.
- Create 100 Entrepreneurial Schools. We will broadly invest in public education so our kids get the support they need to become productive, creative worker. Specifically, we’ll also train up a generation of entrepreneurs. EntreEd, the nation’s leading entrepreneurship education program, was founded in West Virginia. We will work with EntreEd, educators, small business owners, and private foundations to set the goal of making 100 West Virginia public schools certified as “America’s Entrepreneurial Schools” in the next 5 years.
- Level the playing field for small businesses. Big out-of-state companies have rigged the economic game to undercut small businesses. We will make big corporations, especially big out-of-state corporations, pay their fair share–so that small businesses can compete:
- Increase corporate income tax rate from 6.5% to 9%, bringing in $57 million in revenue.
- Reinstate the .7% Business Franchise Tax (eliminated in 2005), but only on large companies, with assets north of $20 million. (See here for a definition of the tax base of the BFT. The rate was 0.70% in 2005. 70 cents per $100 of taxable capital. The reduction from .55% to 0% was $115.7m. In 1997 the rate was 0.90%. To go back to .70%, that should would net an additional $32 million for a total of roughly $148 million. In NC, which has a similar tax, 75% of their franchise tax collections [ page 14] came from businesses with a net worth of $20 million or more. Extrapolating from that, a return of $111 million is reasonable.)
- Enact worldwide combined reporting to eliminate corporate income tax havens, bringing in $68 million in revenue.
- Task a Small Business Taxpayers Council with the goal of pursuing additional tax plans that aim to shift power away from out-of-state corporations, lobbyists, and CEOs into the hands of local entrepreneurs, small businesses, and communities. Below are some examples of what these may include (note that these are not included in the current budget estimates below, but could be added down the road to create additional opportunities for local businesses):
- Disincentivize executives from stealing money from workers by placing a 100% tax on executive bonuses when workers have had assets (like pensions or wages) reneged on.
- Cap merchant/transaction fees to 1%. Doing so would not only put more money in the pockets of small businesses, it would also make West Virginia the best place in America to start, or run, a business with an online or direct sales component. We should also shift fraud liability from small business owners and retailers to credit card companies.
- Create a “Retail Severance” tax or on out-of-state-owned retail. We have business taxes already, but we can also tax at a higher rate when companies like Wal-Mart take profits out of West Virginia.
- Tax franchise/store closures–a vacancy tax on unused/abandoned real capital assets owned by out-of-state persons or companies that make above a certain threshold of profit (in other words, to target places like Wal-Mart and Family Dollar when they close down unprofitable locations after having driven out local small businesses, but where the company itself is still profitable). The revenue generated could be used for targeted communities to support bringing back necessary resources–like grocery stores–in the abandoned commercial location. In assessed property value, we could change the way we value it to include sunk or lost opportunity costs during vacancy.
- Support local zoning and planning efforts to favor local ownership of small businesses.
- Pass an excess compensation tax–see some examples below of what this might look like.
- Taxing employers who create millionaires and billionaires by impoverishing the rest of us–the working and middle classes.
- Taxing executives who make more than 100X of the lowest paid worker in the company
- Taxing companies whose executive compensation is more than 100X the lowest paid worker
- Taxing companies of a certain size (or that make a certain amount of profit) whose workers qualify for welfare or SNAP
- Index minimum wage to CEO salaries: For companies over a certain size threshold, minimum wage for employees is indexed to the compensation of top executives (executive pay cannot be more than, say, 100x higher than the pay of the lowest-paid worker). Note this is executive compensation, not salary. Even at our current tax brackets, this would increase tax revenue, because working class folks would be getting raises. Additionally, this would create jobs, as people at the bottom would have more money to spend to buy goods and services.
How We Pay For It
The costs for this plan are as follows:
- $75 million for 3,000 businesses per year
- $75 million in additional tax credits, to be determined
- $5 million per year to strengthen the Department of Commerce and Secretary of State’s Office, design and implement a streamlined business development process, and fund & train Small Business Advocates
- $2 million one-time audit of regulations
- $1 million to create 100 America’s Entrepreneurship Schools
Total annual costs: $158 million
The one-time tax holiday for small businesses will come from the Rainy Day Fund, as described above.
And here is the revenue it would generate.
- $57 million from increasing corporate income tax rate from 6.5 to 9%
- $68 million from implementing worldwide combined reporting to get rid of safe havens (under 9% rate)
- $111 million from reinstatement of business franchise tax, but only on large companies with more than $20+ mil in revenue
Total revenue: $236 million
Excess funds will be used to help support additional parts of our plan, including our Education Plan.
Every one of our New Deal plans was written by West Virginians.
- Our volunteers asked 11,000 of their neighbors, “What would you do if you were Governor?”
- Our candidates attended 197 Town Halls, taking notes in community centers, church basements, union halls, and small businesses.
- Educators met after work to start sketching out their perfect school.
- Nurses traded ideas on the picket line.
- Our county and constituency captains ratified a first platform in the fall of 2019 and updated it in the spring of 2020 to reflect the current pandemic.
But the legacy of this New Deal dates back to John Brown and Mother Jones, to the United Mine Workers of America and the suffragettes, to the Poor People’s Movement and the CIO.
No one politician or slate of candidates can win this plan alone. We need you.
If you have an idea for how to make this plan stronger, or if you would like to lend a hand to win it, contact our candidate for Governor Stephen Smith at email@example.com.