In early January, state lawmakers will return to Charleston with one task they are required to complete each legislative session: passing a balanced state budget. This process will be particularly challenging in the new year, happening amid declining state revenues from deep state tax cuts and a slowing economy, a looming budget deficit, and significant new safety net costs shifted onto the state from Congress. All of this comes after years of flat budgets have eroded public services, with the state putting less investment toward Medicaid, public education, PEIA, and child care than just a few years ago.
Meanwhile, the state’s wealthiest households are doing quite well. In 2026, West Virginia’s richest five percent of households will receive $1.2 billion from tax cuts enacted over the last decade—all of it revenue no longer available at the state and federal levels to fund public schools, health care, infrastructure, and other needs that benefit us all.
So far in FY 2026, West Virginia’s tax revenue, while exceeding low estimates, has been troubling, especially after the state experienced two consecutive years of declining revenues for the first time since the Great Recession, leaving policymakers working from baseline “skinny” and “flat” budgets that have failed for years to meet the needs of families and workers across the state.
After several rounds of rate cuts, the state’s personal income tax collections have flatlined, while corporate income tax collections have plummeted. Combined with weak job growth, West Virginia’s lawmakers face difficult choices in the coming legislative session.
West Virginia’s total General Revenue Fund collections have totaled $2.23 billion through the first five months of FY 2026, coming in $131 million over the estimate. However, as in past years, much of this so-called “surplus” is due to a modest revenue estimate. Through November, the state’s revenue estimate of $2.01 billion was set lower than last fiscal year’s actual collections at the same point in time of $2.10 billion. A low revenue estimate will generate a surplus on paper, even if actual revenues are flat—or even declining—compared to the previous year.
And remaining flat or declining is exactly what is happening to important sources of state tax revenue in West Virginia. Personal income tax collections, the state’s largest source of tax revenue, through November totaled $877.4 million, only $23.9 million (or three percent) above last year’s collections. Income tax collections for the first five months of the fiscal year are down $104.8 million compared to FY 2023.
Another troubling sign for the state is West Virginia’s declining corporate net income tax collections. Through the first five months of FY 2026, corporate net income tax collections totaled $103.5 million, $19.6 million below this point in FY 2025, and $58.3 million below this point in FY 2024.
While there haven’t been further tax cuts in FY 2026 to drive down revenues, weak economic growth can help explain the lack of revenue growth. So far in FY 2026, total nonfarm employment in West Virginia has declined by 3,400 jobs, as tax cuts continue to fail to generate economic growth. Total nonfarm employment in West Virginia has been largely flat since 2024, falling well behind national average growth. Since January 2024, West Virginia ranks 46th among the 50 states and D.C. for total nonfarm employment growth. In addition, there were 3,000 fewer West Virginians working in August of 2025 compared to August of 2024.
West Virginia’s revenue and economic numbers signal concerns for the FY 2027 budget and the state’s ability to invest in programs proven to help families and workers thrive.
Recent budgets, even under Governor Morrisey, have relied heavily on surplus and other one-time sources of revenue to close considerable budget gaps, and those budget gaps are only growing larger. According to FY 2026’s budget forecast, West Virginia faces significant budget gaps in each of the upcoming four years, growing from a $397 million gap in FY 2027 to nearly $500 million in FY 2030. Notably, those estimates were made prior to the passage of Congress’ “One Big Beautiful Bill” (HR 1) in July, which is expected to shift at least $650 million in additional costs onto the state budget through FY 2030.
An August memo to state agencies from Governor Morrisey’s Department of Revenue instructed them to submit their budget requests with a two percent reduction compared to FY 2026 and further specified that “additional state funding should not be requested to replace lost federal funding.” Put simply, many agencies that have already seen staff and programs slashed in recent years as budget allocations failed to keep pace with inflation should expect to see outright cuts next year if lawmakers do not change course.
Over the last decade, two-thirds of state and federal tax cuts have gone to the wealthiest 20 percent of households, with the wealthiest five percent (who have average annual incomes of over $500,000) now paying $1.2 billion less in taxes per year; this is directly related to the erosion in funding for public schools, PEIA, health care, and infrastructure.1
The West Virginia Legislature enacted deep state tax cuts in 2023, cutting personal income tax rates by over 20 percent and then enacting two more tax cuts in 2024. Two-thirds of those tax cuts went to the wealthiest 20 percent of households, resulting in the state budget shrinking by nearly $500 million per year. At the federal level, Congress passed the Tax Cuts and Jobs Act in 2017, giving tax cuts massively skewed toward high-income people and profitable corporations. Earlier this summer, Congress passed the “One Big Beautiful Bill” that extended and expanded these skewed tax cuts wherein 80 percent of the tax cuts went to the top 10 percent of households in exchange for the deepest cuts to Medicaid and SNAP in our nation’s history.
Now, nearly 10 years into the failed federal trickle-down experiment, it is clear who has benefited the most. Two-thirds of the combined state and federal tax cuts went to the wealthiest 20 percent of West Virginia households according to a new analysis by the Institute on Taxation and Economic Policy.
The richest 1 percent of households in West Virginia alone received 19 percent of the cuts, substantially more than the 13 percent received by the bottom 60 percent combined. The richest 1 percent of households have received combined state and federal tax cuts totaling an average $67,000 annually, higher than the median household income in the state.
In addition to being inequitable, the cost of state and federal tax cuts has been deeply damaging to everyday West Virginians and the public services we rely on. The combined tax cuts to the top 20 percent wealthiest households total more than $2.23 billion annually, or more than the state spends on K-12 education each year ($1.66 billion). The total annual benefit of the tax cut to the top 5 percent wealthiest households in West Virginia ($1.25 billion) is nearly double the state budget expenditure for Medicaid for more than 500,000 residents ($687 million annually). And the cost of the annual tax benefit to the wealthiest 1 percent in West Virginia ($661 million) is more than the state spends on PEIA for 270,000 West Virginians (450 million annually).
West Virginians and lawmakers need not accept more cuts to our schools, health care, and public services as a result of a shrinking budget to prioritize tax cuts that have overwhelmingly benefited the state’s wealthiest households.
Instead, we can meet the moment and address the affordability crisis working families are facing by raising their wages and investing in the services that help them thrive—and we can do all of it without raising taxes on 95 percent of West Virginians. The wealthiest households in West Virginia (those making more than $500,000/year) did not need the huge windfalls of $1.2 billion annually in state and federal tax cuts they have received over the last decade, and enough time has passed to demonstrate that their tax cuts have failed to result in economic growth more broadly for West Virginia. In contrast, they’ve likely harmed our economy by eroding funding for our schools, health care, child care, and infrastructure in the process of diverting more money into the wealthy’s pockets or to Wall Street. It’s time to ask the wealthy in West Virginia to chip in—recouping some of their windfall tax cuts to fill in federal and state budget holes and ensure West Virginia has the resources it needs to invest in its people.
[1] Analysis conducted by the Institute on Taxation and Economic Policy
