Date Requested:February 16, 2005
Time Requested:01:58 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2005R753 Intro HB2276
CBD Subject: Budget Surplus Expenditure
FUND(S)
General Revenue Fund
Sources of Revenue
General Fund
Legislation creates:
A New Program

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

    The stated purpose of this bill is to provide that surplus revenues remaining in the general revenue fund after such revenues have been set aside for the revenue shortfall reserve fund shall be used to reduce personal and corporate income tax rates.
    
    Due to the multitude of factors influencing revenue and expenditures during any one fiscal year, the State Tax Department is unable to provide an estimate of the revenue impact of this bill. However, it is expected that the revenue impact will be relatively insignificant. In most years, the budget includes spending plans equal to the amount of anticipated revenue.
    
    The Tax Department would incur additional administrative costs of approximately $26,000 in Fiscal Year 2005 and in every fourth year thereafter.

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2005
Increase/Decrease
(use"-")
2006
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 26,000 0 0
Personal Services 0 0 0
Current Expenses 26,000 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0
3. Explanation of above estimates (including long-range effect):
    The Tax Department would incur additional costs of approximately $26,000 in Fiscal Year 2005 and every fourth year thereafter. The major portion of the costs would be attributable to the revision and mailing of booklets and informational materials. Booklets requiring revision would include Personal Income Tax Withholding Tax tables and Corporation Net Income Tax forms and instructions for businesses and Personal Income Tax forms and instructions for individuals. Also, changes to addressing and computer audit programs may result in additional costs.


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kpetry@tax.state.wv.us
    The stated purpose of this bill is to provide that surplus revenues remaining in the general revenue fund after such revenues have been set aside for the revenue shortfall reserve fund shall be used to reduce personal and corporate income tax rates.
    
    Beginning January 1, 2005, this bill reduces the rates for both Personal Income Tax and Corporation Net Income Tax in a given proportion to the surplus remaining after surplus revenues have been deposited in the revenue shortfall fund. This action is to occur every four years. This action occurs through enactment of two new sections, not amending the applicable sections currently in existence. There is no indication as to the length of time the rate reduction will remain in effect. There is no indication as to the effect of the existing sections when the new sections are effective. There will likely be confusion.
    
    Revenue estimates are developed from eighteen to twenty-four months prior to the end of the fiscal year for which they are applicable. In some years, a singe event or a series of events unforeseen at the time the revenue estimate was formulated may result in much lower revenue than originally anticipated. In these years the Governor is generally forced to drastically reduce spending to avoid a deficit. The bill provides no guidance on the effect on tax rates when this occurs.