The fact that income taxes have surpassed sales taxes as a source of revenue in West Virginia can be seen as a disturbing development. It's good that money is flowing into state coffers from both sources, but something is out of whack here.
While tax officials credit a tight labor market and Wall Street's bullish attitude over several months as reasons for the growth in income tax revenue, something is amiss. It seems West Virginia's economy is not sharing in the economic good times like the rest of the country. The state's economy has grown at a paltry 1.5 percent a year compared to 4.5 percent nationally. And an anemic growth rate tends to slow retail sales, and hence sales tax that is generated from it.
Still, sales taxes are predicted to grow 1.8 percent for the fiscal year that ends on June 30. However, personal income taxes are the state's saving grace -- this time. The state expects to collect an increase of 7.6 percent in personal income taxes as compared to the same period last year.
Meanwhile, estimated taxes, which most often are paid by taxpayers who reap capital gains on stock market investments, are up 9.4 percent.
"If it weren't for the personal income tax, we'd be in a bit of trouble this year," says Mark Muchow, research director at the state Tax Department.
For one thing, corporate income tax revenue has tumbled by more than 36 percent in the same eight-month period this fiscal year as compared to last.
Thus, state lawmakers have warned that this year's budget could be the last since 1993 that does not increase taxes.
Outgoing Tax and Revenue Secretary Robin Capehart thinks slumping retail sales are the direct result of low incomes in West Virginia. He also thinks tax-free Internet sales are cutting into revenue.
We think state legislators must find a way to address this imbalance in sales and income tax revenue before it worsens. The state can't depend on personal income taxes to keep the ship afloat every year.
The same old refrain can be repeated for the benefit of our elected officials. Better jobs that pay a decent living wage must be created and more students need to be encouraged to attend college to get training for high-tech jobs.
Action has to be taken or West Virginia will continue to languish near the bottom in economic growth for years to come.
Today's editorial is a reflection of the opinion of the Exponent editorial board, which is comprised of James G. Logue, Kevin S. Courtney, Patrick M. Martin, Matt Harvey and J. Cecil Jarvis.