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Staying ahead of our stately neighbors

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Stephen Smoot is an educational director at a media foundation in Washington, D.C. He lives in Keyser with his wife and son.

For at least three generations, West Virginians have not associated their state with the phrase “better economic conditions.” Statistics in recent years indicate that the Mountain State, however, offers a better business climate than its northeastern neighbor, Maryland.

The U.S. Census Bureau County Business Patterns Data show that between 2000 and 2011, Eastern Panhandle counties outperformed their neighbors north of the Potomac.

Allegany County, centered around Cumberland, had 1,847 private sector establishments in 2000. These businesses employed a little more than 25,000 people. In 11 years, the number of businesses dropped by 200 and the county lost almost 650 jobs. Mineral County in the same period lost almost 30 businesses but gained nearly 1,500 jobs.

Small businessman and Delegate Gary Howell, R-Mineral, says that Mineral’s “huge advantage” over Allegany County is “intact property rights.”

No zoning laws “allows small businesses to start and thrive,” he says.

The job differences between Maryland’s Washington County and West Virginia’s Berkeley County are more profound. Between 2000 and 2011, Washington County lost almost 3,000 jobs while its southern neighbor added over 1,000. In population, Washington County grew by an impressive 25 percent, but Berkeley increased by more than 40 percent.

Gary Kelley, owner of a Martinsburg insurance company, notes that tax rates give West Virginia a strong advantage.

“I own commercial buildings in both states and the taxes in Frederick, Maryland are more than double,” Kelley says.

Maryland’s western counties’ struggles come despite having much better infrastructure. Interstate 68 runs the length of that state’s panhandle before entering Preston County. Many Eastern Panhandle residents use the same highway for efficient travel.

Census Bureau local business figures for 2012 come out in May, but it is unlikely that much will change. Maryland’s tax and regulation policies continue to expand, while West Virginia keeps spending and taxation in a holding pattern. Last February, Rust-Oleum announced its movement of its distribution center from Williamsport across the river into Berkeley County.

When asked about the move, spokesman Barry Horner said “Berkeley County and the state of West Virginia demonstrated a pro-business attitude and competitive business environment. We’re very happy to be investing in West Virginia.”

Kelley also noted that Macy’s chose a West Virginia site over one in Maryland for its distribution center.

Is West Virginia’s business climate more inviting? George Mason University’s Mercatus Center actually says no. Its survey of taxes and regulation rate West Virginia at 42 and Maryland at only a slightly worse 44. Meanwhile, nearby Virginia usually tops every list of most business friendly. The Tax Foundation, however, rated the Mountain State 23rd in the nation in business tax burden. Virginia rated 26th and Maryland among the ten worst at 41.

Eastern Panhandle counties benefit from proximity to Virginia, but in entirely different ways. Hampshire County is considered an integral part of the Winchester, Virginia metropolitan area — the 41st best performing urban area in the nation. Residents seem to enjoy Virginia’s top-rated business climate for work and West Virginia’s ninth rated personal liberty laws (by Mercatus Center) for the rest of their pursuits.

Kelley and Howell agree that while West Virginia is doing better, improvements could be made. Kelley argues that West Virginia loses millions yearly due to the inventory tax. Aircraft companies have asked about Berkeley County facilities, but “we have lots of vacant large buildings at the airport that could house large airline related businesses, but the cost on their inventory is way too expensive.”

Howell also pointed to taxes as an obstacle, saying “we must make sure that each tax we charge is in the bottom 20 percent of all states.”

Revenues in the short term would fall, but rising investment would soon offset that.