Personal Income Tax Story Archives - West Virginia Public Broadcasting

State Budget Revenue Healthy, Officials Unsure About Tax Cut Trigger

State revenue is solid for the year, and over estimates, but down from last year because of personal income tax reductions and severance taxes.

West Virginia tax collections are higher than estimated, but it is unclear if another personal income tax cut will happen in 2025.

Legislators heard Monday from Mark Muchow, the deputy secretary of the state Department of Revenue, about 2024 budget revenue numbers.

“After nine months, the state has collected more than $4.07 billion. That’s $522.9 million above estimate,” Muchow said. “It’s down from last year by 11.6 percent, which is pretty good considering that we cut the income tax by 21.25 percent and some reductions occurred in the severance tax as well.”

Muchow said personal income tax collections are $184.1 million above estimate for the year. He explained that it is down 9.4 percent year to date over last year.

“Again, 9.4 percent is pretty good considering that we cut the tax rates by 21.25 and the income tax as a whole was over 40 percent of general revenue fund collections,” Muchow said.

Severance taxes on coal, gas and oil were budgeted for just $22.1 million for this fiscal year to date. So far, the state has collected $48.129 million. That sounds promising, except the previous fiscal year brought in nearly $85 million at this point in 2023 and is off more than 43 percent.

Since taking office, Gov. Jim Justice has maintained relatively flat budgets and kept budget estimates low as well. That has guaranteed annual budget surpluses. Over the last few years, they have topped $1 billion each fiscal year.

Last year, when the West Virginia Legislature passed the personal income tax cut, the bill included triggers that would further reduce those taxes. The triggers are tied to budget surpluses.

Del. Larry Rowe, D-Kanawha, asked about the trigger mechanism during Monday’s meeting.

“Are you able to project whether the August trigger is going to come into play or not?” he said.

“It’s too early for us to do that type of projection. There’s a lot of revenues outstanding. I do believe that the income tax is going to trend lower over the final, at least over the April, May period, [it] may bounce back in June,” Muchow said. “But there’s too many variables out there to make a good, firm analysis on the trigger.”

“When do you think you’ll comfortably be able to make that calculation?” Rowe asked.

“We will not have a complete idea till the end of June,” Muchow said. “But we’ll have a better idea for the end of April. And even better at the end of May. So by the end of May, things will be a little bit better in focus than they are today.”

“So if we were to have a special session in May, and that has been discussed, then you may have the numbers you need to calculate whether the August trigger will come into play?” Rowe asked.

“We’ll have a better idea, but not a perfect idea,” Muchow said. “Again, there’s a number of variables outstanding that we’d have to consider in that equation.”

The Legislature is expected to return to Charleston for a special session on the budget in mid-May following the election but before the end of the month.

Justice: September Revenue Numbers Show Surplus Growth Return

In a Justice administration media briefing Friday afternoon, Revenue Secretary Dave Hardy said September revenues were $210 million above than the estimated budget

West Virginia’s state administrators note that this month’s state budget numbers show the personal income tax cut is not hurting but helping revenue collections.

With revenue amounts for July and August prompting administrative concern, July being about $7 million, Gov. Jim Justice said the September numbers were really good news.

In a Justice administration media briefing Friday afternoon, Revenue Secretary Dave Hardy said September revenues were $210 million above the estimated budget.

Hardy said even with the 21.25 percent personal income tax cut that passed earlier this year, the state is breaking even with income tax collections compared to where it was a year ago.

“That means that we have grown our personal income tax income about 20 percent,” Hardy said. “That’s the story for September, that the state income taxes and our incomes are growing to show that type of revenue growth in such a quick way.”

Hardy said September corporate net income tax collections were $54 million above estimate, growing by 2.2 percent compared to a year ago.

He also said the consumer sales tax was $11.2 million above estimate for September, almost 10 percent above where it was for September 2022.

Independent budget analysts have repeatedly said the Justice administration sets its monthly revenue estimates artificially low.

Severance Tax Shortfalls Could Challenge Record Budget Surplus Numbers

Decreases were expected in personal income tax revenues – and in severance taxes relating to a fluctuating coal, gas and oil market.

Breaking down West Virginia’s $1.8 billion surplus from the past fiscal year, while projecting a 2024 budget, Department of Revenue Deputy Secretary Mark Muchow told members of the legislative Joint Committee on Finance that while funding increases were consistent across the board, decreases were expected in personal income tax revenues – and in severance taxes relating to a fluctuating coal, gas and oil market.

“We also expected a big reduction in severance tax due to lower energy prices,” Muchow said. “Here we have a reduction of $633 million, and the official estimate is 66.9 percent.”

Muchow said recent monthly severance tax collections are currently exceeding budget estimates and will be closely monitored going forward. He said energy production was not the problem.

“Coal production is up 5.9 percent,” Muchow said. “We’re on target for 90 million tons of coal. And natural gas production is up 9.9 percent. It’s all about the price. The math is pretty easy, our tax is 5 percent of the price. So we will rise or fall on price. And we had a very warm winter last winter. Who knows what’s coming in the future?”

Gov. Jim Justice has said new workers and their families coming to West Virginia will offset the 21.25 percent personal income tax cut implemented this year.

Revenue Secretary Dave Hardy noted that these revenue streams tend to slow down in July and August.

“As of the end of August our consumer sales tax revenue was up 2.5 percent from a year ago,” Hardy said. “Our personal income tax revenue as of the end of August, was down 16.2 percent. Well, we did a 21.25 percent income tax reduction. So, the fact that our revenue is only down 16.2 percent in the personal income tax category means that we still have real growth in income in our state.”

Hardy said the personal income tax cut will put a projected $696 million back into citizens pockets through the PIT reduction.

Preparing Workers For New Opportunities This West Virginia Morning

On this West Virginia Morning, Randy Yohe continues with our radio series “Help Wanted: Understanding West Virginia’s Labor Force” by looking at the state government’s job creation and retention plans.

On this West Virginia Morning, the state government has been successful in attracting national corporations to set up shop in West Virginia and they say tourism jobs are ready to explode. The challenge now is filling thousands of positions that demand a wide variety of skill sets. Randy Yohe continues with our radio series “Help Wanted: Understanding West Virginia’s Labor Force” by looking at the state government’s job creation and retention plans.

Also, Emily Rice looks at advocates that held a press conference to discuss resources available to West Virginians on the first anniversary of the Inflation Reduction Act, Curtis Tate learns the creative way Toyota of West Virginia keeps the vegetation under control around its solar array in Putnam County, and more.

West Virginia Morning is a production of West Virginia Public Broadcasting, which is solely responsible for its content.

Support for our news bureaus comes from Concord University and Shepherd University.

Listen to West Virginia Morning weekdays at 7:43 a.m. on WVPB Radio or subscribe to the podcast and never miss an episode. #WVMorning

W.Va. Sets Record With Fiscal Year-End Surplus, Results Questioned

The release noted that at the close of the fiscal year, June 30, 2023, at midnight, total collections for the revenue year will come in at approximately $6.5 billion – 10 percent ahead of prior year adjusted collections – marking the first time in state history that final collections for a single year have exceeded $6 billion.

Gov. Jim Justice announced on Friday that West Virginia’s cumulative revenue collections for Fiscal Year 2023 will come in at $1.8 billion over estimate. He said the budget surplus breaks the record for biggest single-year revenue surplus in state history for the second year in a row.

“I’m going to work with the Legislature to take what’s left unappropriated and continue to make wise investments in what we know will bring us more goodness,” Justice said in a press release. “Things like infrastructure, federal matches, and tourism, because the more we tell the world about West Virginia, the more people will want to live, work, and raise their families here.”

Looking at the fiscal 2023 year end numbers, Kelly Allen, the Executive Director of the West Virginia Center on Budget and Policy, called this a manufactured surplus. She said because Justice set revenue estimates artificially low, that essentially capped the size of the budget and left state financial and employment crisis situations unresolved.

“Legislators have to pass a balanced budget,” Allen said. “They have to stick with that top line number that the governor gave them when they passed the budget that had to stay at $4.8 billion, even though we knew more like $6 billion was going to come in. And we’re seeing the results of that with the budget crisis at WVU, with vacancies at our correctional facilities with other crises that are going on. We think of that surplus as a missed opportunity of taxpayer dollars that aren’t getting to where they’re supposed to go, because agencies and other organizations that depend on state dollars haven’t been able to build those into their budgets.”

In an income breakdown, the release noted:

Severance Tax collections set a record of nearly $950 million, a 24% increase from the prior year, with taxes from natural gas accounting for roughly 60% of total collections.
Corporation Net Income Tax collections grew at 14% and totaled $420 million, eclipsing a record set 15 years ago in 2008.
Personal Income Tax collections set a new record of $2.66 billion, despite a rate reduction of 21.25% that kicked in after the West Virginia Legislature passed and Gov. Justice signed HB 2526, the largest tax cut in State history.
Consumer Sales Tax reached an all-time record of $1.75 billion, growing by about 5.7% from last year, and Interest Income Tax Collections reached an all-time record of more than $132.4 million.

Allen said those record collections are skewed because responsible budgeting requires accounting for inflation’s impact on the budget.

“With inflation, the cost of everything goes up,” Allen said. “Things that the state pays for goes up – salaries for state workers, the cost of health insurance and medical costs, utilities. The costs go up every year a little bit just like they do for households. And by holding the budget flat, that means that the agencies and public organizations that rely on state dollars are able to do less and less with the same amount of money because the dollar just doesn’t go as far. It’s a problem for maintaining services, as we’re seeing in these crises and different sectors all over the state. But it also means that taxes that are being paid by all of us aren’t aren’t getting to the public services that we intended for them to pay for.”

The Justice press release added that, by law, a percentage of the year-end surplus must be transferred to the state’s rainy day fund, this year that amount is approximately $231 million. This leaves approximately $454 million unappropriated. June 2023 total collections are expected to come in at approximately $580 million.

State Budget Surpluses Continue To Rise

For the 2022 fiscal year, the state had a budget surplus of $1.3 billion. Cabinet Secretary for the Department of Revenue Dave Hardy said he expects to surpass $1.7 billion in budget surpluses for the year.

Gov. Jim Justice celebrated budget numbers for the month of April that were $319 million above estimates at a Monday press conference. That brought the budget surplus for all taxes to $1.585 billion for the year so far.

“The April general revenue numbers are the tax collections, are all the different collections that are coming into the state, have surpassed all of our wildest imaginations,” Justice said. “It’s hands down, the single largest collections, I guess in our history.”

April is typically a big revenue month with personal income tax collections and quarterly tax collections for small business. During the last legislative session, the state passed personal income tax reductions which went into effect for April.

Personal Income Tax collections totaled $192.8 million above estimates for April, which is also a new all-time record for a single month despite those reductions. Record year-to-date collections of more than $2.277 billion were $439.5 million above the official estimate and 9 percent ahead of prior year receipts.

April General Revenue Fund Severance Tax collections totaled nearly $35.6 million. Monthly collections exceeded the official estimate by nearly $17.6 million. Record year-to-date general revenue fund severance tax collections of $822.5 million were 48.1 percent ahead of last year and $622.5 million above estimate.

Hardy noted that 65 percent of those severance tax revenues are from natural gas with coal only amounting for about 35 percent.

Consumer Sales Tax collections of $129.2 million were $18.8 million above estimate in April and 5.3 percent ahead of prior year collections. Cumulative collections of more than $1.398 billion were $189.6 million above the official estimate and 6.6 percent ahead of last year.

Corporation Net Income Tax collections totaled nearly $98 million in April. Monthly collections were nearly $65 million above estimate. Year-to-date collections of $330.8 million were $205.8 million above the official estimate and 17.8 percent ahead of prior year-to-date collections.

The surplus comes at a time when the state also faces unbudgeted financial needs in the West Virginia Department of Corrections and Rehabilitation system for infrastructure and payroll. Corrections needs approximately 1,000 more staff members. One proposal is to offer significant pay raises to make them competitive with surrounding states. That alone is expected to cost the state between $40 and $60 million.

Similarly, staffing issues in schools statewide are often traced back to pay. A proposal to raise the pay of new teachers that failed in the most recent legislative session had a cost of $24 million.
The departments of Child Protective Services and Adult Protective Services are also severely understaffed within the Department of Health and Human Resources and libraries across the state have millions in deferred maintenance costs.