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Income tax revenue down as West Virginia begins new fiscal year

CHARLESTON — West Virginia just put a bow on general revenue fund tax collections for the first month of fiscal year 2025, coming in right at estimates. But nearly all major revenue streams, including personal income tax collections, were down as Gov. Jim Justice’s request for more income tax cuts remains in doubt.

According to data from the state Department of Revenue and the Senate Finance Committee, July tax collections were more than $335.3 million for the first month of fiscal year 2025. July collections were more than 1% above the department’s revenue estimate for the month and .1% above collections one year ago.

Helping to get tax collections in the black for July was corporate net income tax collections of nearly $19 million, which came in 78% above the $10.6 million revenue estimate and just a hair below July collections in fiscal year 2024 last year.

But personal income tax collections for July were down nearly 6% below the $151.8 million estimate, coming in at $142.9 million for the month. July personal income tax collections were also nearly 2% below collections this same time last year.

In comparison, fiscal year 2024 tax collections for July last year of $145.6 million were more than 10% above revenue estimates even with the 21.25% personal income tax cut that went into effect in January 2023 with the passage of House Bill 2526 in March of that year.

Another 4% cut in personal income tax rates will go into effect in January 2025 thanks to a personal income tax trigger built into HB 2526. A 4% personal income tax cut would return about $92 million to taxpayers in the next calendar year.

Beginning this August and every August thereafter, the Department of Revenue determines the percentage of the personal income tax cut by comparing general revenue collections in a previous fiscal year minus severance tax collections compared to the base year of fiscal year 2019 and tied to the non-seasonally adjusted consumer price index.

During a July event to celebrate the end of fiscal year 2024 and the more than $826 million in surplus tax collections thanks in part to artificially low revenue estimates, Justice said he would put a bill on a special session agenda for either August or September for an additional 5% personal income tax cut, bringing the total percentage of personal income tax cuts since 2023 to more than 30%. The 5% cut would return an additional $135 million to taxpayers.

But Republican leaders of the West Virginia Legislature, while supportive of phasing out the personal income tax over time, have been reluctant to outright endorse the governor’s 5% income tax cut proposal, which could mean it will not be included on a possible special session agenda. During his weekly administration briefing last week, Justice said negotiations were ongoing with legislators.

“We’ve got a ways to go. There’s a lot we have to do,” Justice said. “If we can’t take $135 million of that money and give it back to the people, it’s their money in the first place, then we’re making a big-time mistake.”

“We don’t want to get out in the out-years and have a hiccup and have a real problem,” Justice said in explaining why lawmakers are reluctant to support his 5% personal income tax cut plan. “That’s the argument, which I think is not really the argument. I think that is the excuse or the bush we’re hiding behind to be able to keep the money and do some pet project.”

Personal income tax collections of $2.2 billion in the previous fiscal year made up nearly 40% of the more than $5.7 billion the state collected for the entire general revenue fund. The 21.25% personal income tax cut returned approximately $483 million to taxpayers.

July tax collections for the consumer sales and use tax and the severance tax on coal and natural gas were also down. Consumer sales tax revenue of the previous month of $142.9 million was more than 5% below the $151.8 million revenue estimate for the month and nearly 2% below July 2023 collections. Severance tax collections of $3.1 million were nearly 29% below the $4.4 million estimate and nearly 17% below July 2023 collections.

Steven Allen Adams can be reached at sadams@newsandsentinel.com.

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