West Virginia’s state revenue collections are still outpacing estimates.
The state’s January revenue figures released today showed the collections exceeded estimates by $52 million.
Total year-to-date general revenue collections are $3,297,772,401, according to state figures. That amount exceeds the official state estimates by $458.6 million.
“West Virginia’s economy continues to defy expectations,” Gov. Jim Justice said in a statement released by his administration.
“Even after historic tax cuts, our January revenue collections shattered estimates by over $50 million, pushing our total surplus to an incredible $458 million. This momentum proves our investments in diversification and responsible budgeting are paying off as we build a brighter future for every West Virginian.”
The state instituted a 21.25% personal income tax cut this year in a package that included further automatic reductions under certain economic conditions. The first trigger could occur this year, and officials are already assessing what size that cut could be.
For last month, personal income taxes came in $3.5 million below estimate.
Senate Finance Chairman Eric Tarr, R-Putnam, said he has been assured by the state’s revenue performance so far this year.
“Very pleased,” Tarr said in an interview on the Senate floor. “We’re about $52 million ahead of the forecast for this month, and there’s a lot of telltale things in there about what the economy’s looking like. If you go across the sectors and look at our sales tax, look at corporate net tax, look at severance tax, those things are trending up for us, so those are really good indicators for the economy.”
He pointed out that so far, despite the personal income tax cut, the state is only about 5 percent below last year’s collections.
That trend could change because of a couple of factors.
One is a new state law providing a workaround to a federal $10,000 cap on state and local tax deductions, often called SALT. The workaround allows partnerships and other pass-through businesses to pay West Virginia income taxes as entities rather than passing the tax through to individual owners.
The upshot could be more of those tax collections up front and more tax credits and refunds in the second half of the fiscal year.
Another potential factor in tax collections is the credit for property taxes on automobiles that went into effect Jan. 1.
And yet another factor is the possibility that West Virginia could hit a trigger to further reduce personal income taxes.
“We’ll see some changes come soon,” Tarr said, “especially as we get into April and you start seeing tax returns coming in and out and those types of things.
“There will be a little bit of variance because of the passthrough entities on the SALT. Some of those entities paid their tax ahead of time or maybe even double paid it to make sure they took advantage of that SALT tax credit that they can get from being able to pay with their business what would have been their personal taxes, so they can deduct that from federal.”
He continued, “It doesn’t really change what their income tax is in West Virginia for the state side of it, except they may have paid it twice right now to be getting some of that back, to capture that SALT credit. So I think there will be some change as the next couple of months as we get closer to that April mark. But by and large, usually the second half of the fiscal year performs better than the first half.”