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W.Va. tax collection shortage worse than it appears

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W.Va. tax collection shortage worse than it appears
By Phil Kabler, Staff writer

Weak tax collections in May were actually worse than they appear, state Department of Revenue officials said Thursday.May tax collections of $280.7 million fell nearly $4.8 million, or 2 percent, below estimates.

However, as Deputy Revenue Secretary Mark Muchow explained, those figures were propped up by the transfer of $15.6 million from the state’s Income Tax Reserve Fund and by a larger-than-expected transfer of state Lottery profits. The $25.15 million transfer of Lottery revenue was $14 million more than anticipated — but will mean that this month’s transfer will be smaller than hoped.

Take away those transfers, and not only did state revenues fail to meet projections in May, but were down more than 9 percent from May 2014.

“Not a particularly good month,” Muchow noted.Of the two major sources of tax revenue, personal income taxes continue to be a bright spot, up 6 percent over May 2014 even with the $15.6 million transfer excluded, and up 9 percent year-to-date at $1.645 billion.

Particularly encouraging, Muchow said, is that payroll withholding tax payments are up nearly 4 percent year-to-date.The same can’t be said for the other major tax source, consumer sales taxes, which were down 5 percent compared to May 2014, and are running nearly $18 million below estimates year-to-date, at $1.1 billion.Muchow said an ongoing downturn in construction, and more recently, an increase in coal industry layoffs, is hampering sales tax collections.

“People are worried about their future employment prospects,” Muchow said, noting that has resulted in a downturn in retail sales.Severance tax collections, primarily from coal and natural gas production, came in slightly below estimates for May at $33 million, but are running 14 percent below projections year-to-date, at $363.65 million.

“The biggest reason for the decline is that energy prices have plummeted,” Muchow said.With the 2014-15 fiscal year ending on June 30, Revenue Secretary Bob Kiss said that, barring disastrous June collections, the state is still on target to finish up with about a $60 million budget shortfall.

He said the state has funds set aside to close that gap, including the Income Tax Reserve Fund, and about $20 million saved through the ongoing state hiring freeze.“These are cards we have in our hand, and we’re ready to play them,” he said.

“Obviously, $60 million in a $4 billion budget is a small number by comparison,” Kiss said.