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Taxes, overseas business competition challenge state manufacturers

WHITE SULPHUR SPRINGS, W.Va. -- Taxation and competition with other overseas businesses are a couple of the challenges facing West Virginia manufacturers, business leaders said Wednesday.

Tom DeWitt, president of Swanson Industries of Morgantown, said in competing for business with a company from South Korea recently, the level of taxation in West Virginia gave the edge to the foreign company.

The South Korean company is more competitive with material and labor costs too, he said. But taxes were most significant reason why the South Korean company was able to compete with Swanson, Dewitt said.

"We looked at what we pay, which is roughly 41.5 percent taxes on our income and we looked at South Korea, which pays 24 percent," he said.

He continued that his company has to charge 20 percent more than the company from South Korea in order to get the same return.

DeWitt's comments came at a panel forum held at the West Virginia Chamber of Commerce's annual Business Summit at The Greenbrier resort in White Sulphur Springs.

Before the forum, Sen. Joe Manchin, D-W.Va., talked about the federal government's need to get out of debt. Gov. Earl Ray Tomblin, also D-W.Va., spoke of West Virginia's positive financial status.

Dewitt said that while Manchin and Tomblin may be optimistic about the state of the nation and the state, he is not as hopeful.

"With all due respect, I wish I was as optimistic," Dewitt said.

Dewitt challenged state leaders to consider what could be done to encourage businesses to locate or expand in West Virginia.

Speakers on the manufacturing panel also lamented job losses in manufacturing over the last few decades.

Beri Fox, owner and president of Marble King in Paden City, quoted job numbers that indicate over the last decade, 2.7 million jobs have been lost because of a trade deficit with China. Of that 2.7 million, 77 percent were lost in the manufacturing field, she said.

Today, West Virginia has 50,000 manufacturing jobs, down from 165,000 a decade ago, she said.

The trade deficit with China is not only the reason for the job losses, she said. China can ship glass anywhere in the United States that costs them 28 cents per pound, while manufacturing glass in the U.S. costs 57 or 58 cents per pound, she said.

Fox encouraged Chamber members to support passing a currency reform bill that started in the U.S. House of Representatives. House bill 639 would amend the tariff act to include a provision to penalize foreign countries that undervalue their currency.

Fox said the bill would be the first step in addressing the issue of unfair competition with businesses from other countries.

Timothy Duke, president and CEO at Steel of West Virginia, said the state's legal environment is not good for businesses. There are too many frivolous lawsuits, he said. Corporate income taxes in West Virginia have been falling but are still 22 percent higher than in Virginia, he said.

Workers' compensation costs, which have dropped drastically since they were privatized in the past decade, are lower than Virginia but still more of a burden than in other states, Duke said.

Reach Lori Kersey at (304) 348-1240 or Lori.Kersey@wvgazette.com


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