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Tax credit for vehicles hurts state collections

CHARLESTON, W.Va. -- A rush of car buyers taking advantage of a state tax credit on alternative fuel vehicles before it was repealed April 14 continues to have repercussions on state tax collections, Deputy Revenue Secretary Mark Muchow said Thursday.Overall tax collections for July came in at $297.2 million, about $17.9 million below estimates, Muchow said.The big culprit was a $28.8 million downturn in personal income tax collections -- $19 million of which was from taxpayers claiming the alternative fuel tax credit against their July income tax payments.Part of a 2011 law intended to promote investments in Marcellus Shale and other natural gas developments, it allowed buyers of alternative fuel vehicles to write off 35 percent of the purchase price of the vehicle, up to $7,500 for passenger cars, and up to $25,000 for commercial vehicles.Muchow said the bill initially applied only to natural gas-powered vehicles, but was amended at the last minute to extend the tax credit to all hybrid and alternative fuel cars and trucks.During the 2013 regular session, legislators passed a law limiting the credit to natural gas vehicles only. However, publicity about the Legislature closing the loophole led to a surge in sales of alternative fuel vehicles prior to the 14th.Muchow said the impact of the tax credits will affect personal income tax revenues through next April. In June, the credits accounted for $29 million of lost tax revenue.
Payroll withholding taxes also fell about $9.5 million below projections. Muchow said that's a combination of no growth in salaries or wages, a loss of some mining and manufacturing jobs, and rainy weather that has caused construction workers to lose days of employment.On a positive note, consumer sales taxes came in $800,000 above estimates for the month, at $105.8 million, and severance taxes came in $6.8 million over projections, at $45.8 million.Muchow said part of that was timing, with payments normally due at the end of June coming in early July, but said increases in natural gas prices and production also spurred the upturn.Meanwhile, the state closed the 2012-13 budget books with a small $11.8 million surplus."That's only because some agencies did not spend all the money appropriated to them," Muchow said.Of that, $3.5 million will go into the state's Rainy Day Fund A, with the remainder available to be appropriated in the 2014-15 state budget.Reach Phil Kabler at or 304-348-1220. 
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