Of revenue generated from severance tax, 48% was from natural gas and 35% was from coal

By Autumn Shelton, West Virginia Press Association

CHARLESTON, W.Va. – “I’ve probably got the best time to be Secretary of Revenue in the history of the state … Things went remarkably well in fiscal year 2022.” 

That was the message from Dave Hardy, cabinet secretary for the WV Department of Revenue, to the members of the Legislative Joint Standing Committee on Finance during their interim meeting on Monday, scheduled just a few hours prior to convening for a Special Session called by Gov. Jim Justice. 

Hardy said the state’s revenue growth for FY 2022 was 22.1% over FY 2021, adding that amounted to more than $1.07 billion. 

“That means, in the fiscal year, we had a surplus bigger than the entire state Rainy Day Fund,” Hardy noted. “It took 30 years to build that Rainy Day Fund, and in 12 months we had revenue growth in excess of the Rainy Day Fund.” 

The state was able to generate this revenue through the consumer sales tax (up 7.7% for the year), personal income tax (up 16.8%), corporation net income tax (up 38.5%) and severance tax (up 180%), according to Hardy.

Of the revenue generated from severance tax, 48% was from natural gas and 35% was from coal. 

“So, the predicted gas boom is upon us,” Hardy said. The remaining severance tax revenues were filed under “miscellaneous” and included revenue from oil and natural gas liquids. 

“These are great times and we will be closing our books officially on July 31,” Hardy concluded, adding that the state is going into FY 2023 “very, very strong.” 

Mark Muchow, deputy secretary for the WV Department of Revenue, next spoke the committee.

He said that in June, the state collected $677.4 million in revenue–a 25.4% increase over funds collected in June 2021. Additionally, sales tax is up 9.7% for the month, personal income tax is up 22.8%, corporation net income tax is up 12.3% and severance tax is up 115%. 

Muchow explained that revenue growth from coal and natural gas hasn’t been driven by increased production, but high demand–especially for natural gas. 

“If you were to look at inflation, the poster child for inflation would be natural gas,” Muchow said. “The cost of natural gas is sky high because it’s a world-wide commodity and it’s in short supply in various areas around the world–particularly in Europe.” 

For the State Road Fund, Muchow said revenue was $42 million below estimate. 

He explained the budget shortfalls were a result of vehicle registration fees being down ($37.8 million) and the fuel excise tax being down ($10.4 million). 

The next speaker, Andy Deloney, vice president of state public policy for the Distilled Spirits Council of the United States, discussed taxation on ready to drink (RTD) beverages. 

He said in 2021, there were roughly 37 million cases of spirits-based RTDs sold in the United States. 

“The pandemic accelerated the growth of these products as adult consumers looked to recreate the cocktail experience at home with convenient pre-mixed cocktails made with premium spirits, fresh ingredients and low alcohol content.” 

Further, Deloney stated that “West Virginia spirits consumers are forced to pay much higher for a spirits-based RTD product, even if the product has the exact same or a similar amount of alcohol as an RTD made with malt, sugar or wine.” 

“For example, at 6% alcohol by volume, the West Virginia rate on spirits-based on RTDs is 35 times the rate on malt and sugar based beverages,” Deloney said, adding that this price markup makes West Virginia less competitive in the region. 

He suggested that legislators update tax laws so consumers can enjoy spirit-based RTDs at an affordable price while the state continues to generate returns. 

Lastly, Chris Marr representing the West Virginia Association of Counties, discussed collection of personal property taxes. 

He stated that his team is still working on gathering data for all personal properties that would be affected by Amendment 2. 

“Generally speaking, personal property taxes comprise nearly 35-40% of all property taxes collected by counties,” Marr said. “Total real personal property comprises the other 60%.” 

On assessed values, roughly 97-98% is collected by counties, Marr explained. Of that revenue, approximately 26% goes toward providing local government services and 66% of those collections goes toward education. 

Marr said once the data is collected, the department will be able to provide more specific details to the legislature.