A Mountain of Money: West Virginia tax revenue surplus nears $1B as tax cut deal remains elusive | News, Sports, Jobs
CHARLESTON – West Virginia’s January tax hikes have brought the state’s tax revenue surplus to nearly $1 billion.
Now Gov. Jim Justice and the Republican majority in the Legislature must figure out how to return some of that back to taxpayers.
According to a monthly report by the US Senate Treasury Committee, January tax receipts of $621.1 million were 35% higher than the US Treasury Department’s estimate of $461.9 million, resulting in tax receipts of $162.2 million.
Year-to-date tax revenue for the current fiscal year 2023, which begins July 2022 through January, was US$3.676 billion, up 37% from the estimated revenue of US$2.681 billion, resulting in tax revenue of 995.3 million dollars with just five months left in the fiscal year.
“We knocked it out of the park again for the month of January,” Justice testified from his office in the Capitol on Wednesday during a virtual administrative meeting. “We are now sitting on the above estimates for seven months of this year.”
Half of the surplus in fiscal 2023 can be attributed to higher prices for coal, oil and natural gas. Year-to-date severance taxes of $631.2 million were 373% higher than the estimate of $133.4 million, resulting in tax receipts of $497.8 million. January severance tax revenue of $90.3 million was 247% higher than the estimate of $26 million for net income for the month of $64.3 million.
More than 40% of the $3.676 billion in tax revenue to date has come from personal income tax receipts, with $181.6 million in excess personal income tax receipts accounting for 18% of the state’s year-to-date tax surplus. January personal income tax receipts of $305.3 million were 20.3% higher than estimated earnings of $253.9 million for net income for the month of $51.4 million.
The personal income tax is at the center of a debate on West Virginia tax reform, with both the Judiciary and House of Representatives supporting a gradual 50% cut in personal income tax rates in all six classes, while Republicans in the state Senate review the plan.
“Without question in the world, it would be absolutely stupid not to believe that with a 50 percent tax cut in the state of West Virginia, we can move forward very safely and very conservatively, especially if we do it judiciously.” said justice.
The House of Representatives passed the governor’s plan, House Bill 2526, more than two weeks ago, although the Senate has yet to consider the bill in committee. Instead, the Republican leadership in the Senate is developing its own plan while raising concerns about the long-term financial impact of the governor’s plan coupled with incoming requests to spend additional excess dollars the state has.
“I’m willing to compromise with the Senate if they just give me something.” said justice. “It’s nice to say we’re still studying it, but come on, we don’t have to go to an auction alone.” said justice. “We absolutely have to do something for the hard working people of this great state and give them money back. It’s not our money.”
HB 2526 would gradually introduce a 50 percent cut in personal income tax, with a 30 percent cut retroactive to January this year. According to the Treasury Department’s tax release, the first 30 percent cut would return taxpayers $161.8 million in the current tax year, which ends in June. Another 10% cut would come into effect from July, giving taxpayers $1.085 billion.
Last week, Senate Speaker Craig Blair said the Senate would not be pressured to pass HB 2526 until the bill is fully considered and until further legislation is passed during the remainder of the 2023 legislative session that has costs that affect the proposed budget setting the budget Budget impact for fiscal 2024 in July.
Justice proposed a fiscal 2024 general revenue budget of $4.884 billion, up 5% from the fiscal 2023 general revenue budget of $4.645 billion passed by lawmakers last year. State Treasury officials estimate that the state could bring in $6.1 billion in the next fiscal year, giving the state $1.216 billion in excess tax revenue.
The state is also sitting on more than $500 million in excess tax revenue after ending the previous fiscal year in June with $1.3 billion above estimated revenue. Lawmakers will consider 28 bills for additional funds, reducing that excess to nearly $200,000. Senate Finance Committee Chairman Eric Tarr, R-Putnam, said his committee will hold a meeting with state officials on Friday to ask questions about those spending.
Tarr also said lawmakers must consider bills that will be passed in this session that will have significant costs, as well as the possibility of putting $300 million into the state’s Rainy Day Fund to cover losses from lost investments. After surpassing $1 billion in September of fiscal 2022, the Rainy Day Fund has fallen to $916.5 million.
“We have to go through and see what the state’s spending is going to be before we go in and decide how much revenue we’re not going to take in.” Tarr said after Wednesday’s meeting. “We want a tax cut and there is money for a tax cut, but there is no money for an irresponsible tax cut. Until we know how much the government is spending, I don’t think you will see us proposing what that revenue should be.”
State Department of Revenue officials believe West Virginia will end future fiscal years through fiscal 2027 with surpluses in excess of $1 billion as long as revenue estimates are kept low and budgets flat, keeping new spending growth at 3% per fiscal year year. HB 2526 also creates a $700 million fund to cover potential deficits or market turmoil that could hurt government finances when the tax cuts kick in.
When asked about Tarr’s concerns, Justice accused the Republican legislature of scaremongering.
“We’re always trying to find some kind of roadblock or obstacle to scare people.” said justice. “Ultimately, market conditions are driving this and we have incorporated these numbers into our numbers and we continue to do so. I don’t know what we’re trying to do.
“At the end of the day, we did really well in our state. We have to go ahead and do something that rewards our people.” said justice. “I hate to say it, but you have very, very few trying to set up roadblock after roadblock. I think we should sit down. If you want to take it a little slower, let’s take it a little slower. We don’t have to go straight to 50%.”
Steven Allen Adams can be reached at [email protected]