New Report: West Virginia Can Raise $79.4 Million with New Wealth Proceeds Tax to Fund Critical State Needs

For Immediate Release: October 30, 2025

Contact: Renee Alves at WVCBP or Jon Whiten at ITEP

Charleston, WV— Taxing the proceeds generated by wealth – such as capital gains, dividends, and passive business income – through a new Wealth Proceeds Tax that mirrors the federal Net Investment Income Tax (NIIT) is a simple, shovel-ready way for West Virginia to raise tens of millions in new state revenue, fund vital state programs, and improve the fairness of the tax system, according to a new report by the Institute on Taxation and Economic Policy (ITEP).

“States have an untapped opportunity to tax extremely wealthy households,” said Sarah Austin, ITEP senior analyst and co-author of the report. “The federal government already defines what counts as wealth-derived income, so states can easily adapt that framework to make their tax codes fairer and more robust.”

Key Findings

• Substantial revenue potential: A 4 percent Wealth Proceeds Tax modeled on federal rules could raise more than $69.6 million a year for West Virginia; an enhanced version would raise $79.4 million a year. 
• Taxes the wealthy, not the middle class: About 52.1 percent of the new revenue would come from households with incomes over $1 million; only 1.9 percent of taxpayers in West Virginia would owe any tax.
• Fairer treatment of wealth and work: Most of the income generated by wealth currently faces effective federal tax rates roughly 40 percent lower than wages and salaries. A state Wealth Proceeds Tax would help correct this imbalance.
• Simple to implement: West Virginia can piggyback on federal tax filings, minimizing administrative costs for both taxpayers and West Virginia’s tax department. 
• Minnesota already leads the way: The state enacted a 1 percent Wealth Proceeds Tax in 2023 using a straightforward law just 223 words long.

Creating a state Wealth Proceeds Tax is simple. West Virginia can piggyback on the federal Net Investment Income Tax (NIIT), which is a 3.8 percent levy on the investment returns of high-income households first implemented in 2013. Using the NIIT as a starting point allows states to design new taxes with minimal administrative burden and maximum impact.

“Enacting a Wealth Proceeds Tax would create a new, stable funding source for state lawmakers to invest in programs that strengthen today’s workforce and the next generation of West Virginians. As just one example, lawmakers have made clear the need for more investment in our early childhood education programs, and the Wealth Proceeds Tax can provide much of the revenue they need to make that priority a reality, while simultaneously making our tax system more equitable,” said Kelly Allen, executive director of the West Virginia Center on Budget and Policy. 

Nationwide, nearly three-quarters of all Wealth Proceeds Tax revenue would come from millionaires, and households with incomes under $250,000 for married couples (or $200,000 for single filers) would not pay the tax. 

Taxing wealth-derived income would improve tax equity, reduce inequality, and provide a new, consistent revenue source for West Virginia.

“For too long, our tax systems have favored wealth over work,” said Carl Davis, ITEP’s research director and co-author of the report. “State Wealth Proceeds Taxes would take a major step toward correcting that imbalance.”

Read the full report.