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West Virginia Amasses Surplus of $427 Million in First Quarter of Fiscal Year

CHARLESTON — As a debate over how to provide tax relief for West Virginians rages on, the state has amassed just short of a half-billion dollars in surplus tax collections in the first three months of the current fiscal year.

According to data the West Virginia Senate Finance Committee released Monday morning, tax collections for West Virginia’s fiscal year 2023 general revenue budget for July, August and September totaled $1.5 billion, which was 38.8% more than the $1.1 billion revenue estimate, leaving the state with a $427 million surplus.

Tax collections for the first three months of the fiscal year that began on July 1 also exceeded the previous fiscal year’s first-quarter collections by 28%. During this same time period in fiscal year 2022, the state collected $1.2 billion with a $333.1 million surplus for the quarter. The $427 million in tax revenue surplus for the quarter represents nearly a third of the $1.3 billion tax revenue surplus with which the state ended fiscal year 2022.

September tax collections came in at $638.8 million, 42.2% more than the $446 million estimate from the Department of Revenue set on July 1. September’s tax revenue surplus was $192.8 million. September revenue collections also outperformed September 2021 collections by 26.6%.

Speaking during an event in Lewisburg Monday, Gov. Jim Justice praised the quarterly tax revenue numbers, remembering a time when he first took office when the state was facing a more than $500 million tax revenue deficit.

“We’ve honestly become numb to it,” Justice said. “Today we have all these incredible surpluses going on.”

By pure dollars, personal income tax collections brought in the most money for the month and the quarter. September tax revenue collections were $260.9 million, 21.2% more than the $215.3 million estimate, leaving a $45.7 million surplus for the month. Quarterly collections for the personal income tax of $608.2 million were 14.1% more than $553.1 million in projected collections, giving the state a $75.1 million surplus for the quarter.

By percentages, the severance tax on coal, oil, and natural gas exceeded revenue estimates by nearly 475% for the quarter. Severance tax collections for July, August, and September came in at $272.1 million, while the revenue estimate only projected $47.4 million in collections for the quarter — a $224.7 million surplus. September severance tax collections of $88.3 million were 320.5% more than the $21 million revenue estimate, giving the state a $67.3 million surplus for the month.

Corporate net income tax collections of $103 million for the quarter were 123.7% more than the $46 million revenue estimate, providing the state with $57 in tax revenue surplus for the quarter. September corporate net income tax collections of $94.6 million were 136.6% more than the $40 million estimate, making up for a negative $6.1 million shortfall in August.

Consumer sales and use tax collections for the quarter are also ahead of expectations. Sales tax revenue of $394.9 million for the quarter exceeded the $345.3 million revenue estimate by 14.4%, leaving the state with $49.5 million for the quarter. September sales tax collections of $147.7 million were 14.8% ahead of the $128.7 million estimate, for a $19 million surplus for the month.

Factors driving the state’s tax revenue include maintaining a flat general revenue budget for the last several years, natural growth in tax revenue, higher prices of goods caused by inflation, energy prices driving demand for coal and natural gas, and federal COVID-19 relief dollars in infrastructure dollars freeing up state tax dollars.

With record-breaking tax surplus dollars in the prior fiscal year and current fiscal year tax revenue set to meet or exceed the prior year’s surplus numbers, state officials are fighting over the best way to return tax dollars to West Virginia taxpayers.

Republican lawmakers, driven by GOP members of the Senate, are focused on encouraging voters to approve Amendment 2 in November, allowing them to reduce or eliminate six categories of tangible personal property taxes that county governments and school systems rely on and returning more than $515 million to taxpayers.

If voters approve Amendment 2, Senate Republicans have a draft bill that would replace the lost tax revenue to counties with funding from the general revenue budget and distribute it to counties based on a formula that would provide each county with a minimum of $1 million on top of their annual tax assessments. The Senate Republican bill would also include a 10% across-the-board personal income tax cut.

The combined plan could return more than $800 million to taxpayers beginning in July if Amendment 2 is approved and the Legislature passes the draft bill in January. In a statement Monday, Senate President Craig Blair, R-Berkeley, said the state’s tax revenue surpluses show that the state can afford cutting the personal income tax and eliminating tangible personal property taxes.

“It goes to show what we’ve been saying all along in the Senate: Holding a flat-line budget paired with these record-breaking revenue collections is exactly why we are able to eliminate the personal property tax on vehicles and on machinery, equipment and inventory and ensure that counties do not suffer,” Blair said. “We’ve spent years working toward this goal and have provided the blueprint for its success. With the passage of Amendment 2, we’re ready to go.”

Gov. Jim Justice opposes Amendment 2 and the Senate Republican draft bill eliminating the tangible personal property taxes, spending the last two weeks on the road to encourage voters across the state to vote against the amendment.

“You’re being hoodwinked into voting on something. You’re being asked to vote on something to give (the Legislature) complete control and they’re telling you what they’re going to do with your money and you haven’t even seen (the draft bill),” he said.

Instead, Justice supports cutting the personal income tax by 10% with the ultimate goal of phasing out the personal income tax which accounts for nearly half of the state’s general revenue tax collections.

“Let’s get on a pathway to doing something that’s proven beyond belief that will drive goodness and growth to West Virginia,” Justice said. “That 10% cut would have put roughly between $250 million and $280 million back in your pockets…If we get rid of your personal income tax, you’ll see it tomorrow. We were going to keep your paychecks flowing just like they’re flowing, but every three months send you the money back.”

The West Virginia Association of Counties, which has been meeting at the Stonewall Resort in Lewis County since Sunday, is opposed to Amendment 2 and is having a panel discussion today about the negative effects if the amendment is approved by voters. The West Virginia Chamber of Commerce and West Virginia Manufacturers Association support Amendment 2 and are hosting a roundtable discussion today in Parkersburg on the positive effects of the amendment.

Justice will also be in Parkersburg today on his road tour around the state opposing Amendment 2. Blair has attended at least one of Justice’s events and has pointed to the governor’s previous support for eliminating tangible personal property taxes on machinery and equipment and inventory in 2018 and 2019.

“The governor has said over and over he wants to provide relief to average West Virginians, and that’s exactly what Amendment 2 will accomplish,” Blair said. “We can help families get rid of that car tax payment, we can help small family-owned businesses, which are the backbone of our communities — get relief from taxes that hound them even if they don’t make a profit, and we can make sure our counties, our schools, our police, fire, and emergency services, our libraries, and more remain strong. It’s a win for everybody.”

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