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Justice: Tax revenues above projections again

CHARLESTON — There was no press conference, no celebratory video and no Hawaiian leis handed out, but that doesn’t mean West Virginia’s October tax revenue numbers were bad.

According to the most recent numbers from the governor’s office, October marked the seventh month in a row that tax revenues came in above projections. Still, data show that revenue could slow down when all the tax receipts come in for November.

In a press release over the weekend, Gov. Jim Justice reported that October revenues came in at $359.2 million, which was $2.4 million above estimates and 1.5 percent above tax collections for October 2017.

“West Virginia’s economy continues to move forward and Revenue Fund collections keep exceeding the estimates for Fiscal 2019,” Justice said. “This is a great story that keeps getting better and the numbers keep supporting it.”

Justice attributed the surplus to revenue from severance taxes, the consumer sales tax, the personal income tax and the corporate net income tax. Year-to-date severance tax collections were 50 percent ahead compared to last year, while consumer sales tax collections were 14 percent ahead. Year-to-date corporate net income tax collections were 15 percent ahead of last year.

Year-to-date personal income tax collections were 12 percent ahead, though October personal income tax collections came in at $156 million, $6.5 million below estimates. The state Department of Revenue attributed this to lower-than-expected withholding tax receipts.

Corporate net income tax collections for October also came in at $2.3 million, 63 percent lower than the prior year, or $3.2 million below estimates. Officials attribute this to increases in monthly tax refunds and noted that the previous month saw better numbers.

“Sometimes when you get a big push one month, that’s going to come at the expense of the following month,” said Mark Muchow, deputy secretary of revenue, during a legislative committee meeting Sunday in Charleston.

October’s consumer sales and use tax collections came in at $100 million, $4.2 million above estimates and 8 percent above last year’s collections. Severance tax collections for October came in at $24.8 million, or 2 percent ahead of last October’s revenues due to coal exports and higher natural gas prices.

“(Coal) exports overseas are the big determining factor there,” Muchow said. “In the case of natural gas, it’s a bit higher production numbers along with more stable pricing this year compared to last year.”

According to revenue department data, the first four months of the 2019 fiscal year starting in July 2018 saw a growth rate of 13.5 percent, a 25-year high. Also, at a 25-year high was cumulative sales tax growth.

The state also is giving retailers a grace period before collecting the sales tax on online purchases. Despite coming out against online sales tax collections, Justice reversed course and directed companies, regardless if they have a physical presence in the state, to begin collecting sales taxes. Those collections are slated to begin Jan. 1 and could bring in as much as $21 million starting in the next fiscal year, according to Muchow, and approximately $10 million between February 2019 and June 2019.

“It’s certainly a big step,” Muchow said.

When compared over a five-year period, the first four months for the 2019 fiscal year — July, August, September and October — all trended upward. West Virginia’s tax revenue came in at $299 million in fiscal year 2016. Compared to October of this fiscal year, the state saw a 20 percent increase in revenue over the same month in fiscal year 2016.

In comparing July over five fiscal years, revenue dropped from $274 million in fiscal year 2015 to $225 million in fiscal year 2017, but went up to $314 million this year. Despite a small dip in fiscal year 2018, August revenue collections over five years have gone up, from $289 million in fiscal year 2015 to $352 million in August. September also saw a low of $376 million in fiscal year 2017, but that has since increased to $453 million this year.

That could all slow down in November. Looking at tax revenue data from the state Budget Office between fiscal years 2014 and 2018 — when state government was seeing budget cuts — November revenue numbers did not come close to $300 million. That changed last November when revenues came in at $298 million.

The state saw increases in tax revenue in December and January consistently over five years, but those numbers typically trend back down in February. Outside a $312 million spike in fiscal year 2016, February revenue numbers typically stay between a $300 million and $200 million range.

July, the beginning of the fiscal year, is traditionally a month when revenue is down. Until this past July, when revenue came in at $314 million, fiscal year 2015 had the best July with a revenue of $274 million. According to the state Tax Department, this year’s July revenue growth was the best since 2011.

Justice and lawmakers have promised to give state employees, teachers and school service personnel an additional 5 percent pay raise. They also promised to put $100 million into the Public Employees Insurance Agency.

The state’s four-year colleges and universities plan to ask the Legislature for $10 million to help partially restore state funding lost over the last few years.

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