Severance, Sales Tax Rise In May, But Total State Revenue Is Down

Higher severance tax and sales tax revenues helped offset a slump in personal and corporate income tax revenues in May.

Higher natural gas prices and increased demand for coal to produce electricity pushed severance tax revenues to $47.5 million in May, a 44% increase over May 2024.

Personal income tax receipts in May fell to $98 million, down 28.5% from the prior year, while corporate income tax receipts also fell. Sales tax revenues increased 4% to $170.8 million. 

Still, the total revenues from the beginning of the fiscal year are $158.4 million short of what they were a year ago to date, though $236.8 million above estimate.

Kelly Allen, executive director of the West Virginia Center for Budget and Policy, says sales tax growth has not been as strong as proponents of cutting the personal income tax projected.

“There’s certainly no growth in the sales tax offsetting the declines we’re seeing in other key parts of revenue that fund the state’s budget,” she said.

Allen notes the severance tax is not a reliable revenue stream because the price of fossil fuels goes up and down.

Allen said total revenues for this fiscal year are nearly $1 billion short of where they were two years ago, when the price of and demand for coal and natural gas were even higher.

That windfall did offset the cost of cutting the personal income tax, but that’s no longer the case.