FISCAL NOTE
FUND(S):
General Revenue Fund
Sources of Revenue:
General Fund
Legislation creates:
Neither Program nor Fund
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this bill is to reduce state income taxes for state and federal retirees by increasing the exemption on retirement income in calculating the federal gross income for state personal income tax purposes.
Assuming that the bill is effective for taxable years beginning after December 31, 2007, General Revenue Fund collections by would be reduced by approximately $5.4 million per year beginning in FY2009.
There would be no additional administrative costs for the State Tax Department as a result of passage of this bill with application to tax years beginning after December 31, 2007.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2007
Increase/Decrease
(use"-") |
2008
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
0 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
-5,400,000 |
Explanation of above estimates (including long-range effect):
Assuming that the bill is effective for taxable years beginning after December 31, 2007, General Revenue Fund collections by would be reduced by approximately $5.4 million per year beginning in FY2009. The bill, as written, increases the decreasing modification to $20,000 for just federal retirees. In addition, it removes retirement income from federal and military pensions, PERS and Teachers Retirement from the calculation of the $8,000 decreasing modification for senior citizens and persons who are totally and permanently disabled. This secondary change increases total income exclusions, including non-retirement income, for some public sector retirees by between $2,000 and $16,000.
There would be no additional administrative costs for the State Tax Department as a result of passage of this bill with application to tax years beginning after December 31, 2007.
Memorandum
The stated purpose of this bill is to reduce state income taxes for state and federal retirees by increasing the exemption on retirement income in calculating the federal gross income for state personal income tax purposes.
Subsection (c)(5) changes the date for the taxable years from 1986 to 2006. This effectively means that the proviso immediately preceding the date would not be in effect for the twenty-year time frame. This could lead to numerous claims for refunds because the $2,000 limitation on the decreasing modification would be repealed.
Proposed subsection (c)(5) also changes the year “1988” and replaces it with “2007”. If read in conjunction with the change from “1986 ” to “2006” discussed in the paragraph above, it would appear that for tax year 2007 there would be no limit to the total amount claimed as a decreasing modification.
Person submitting Fiscal Note: Mark Muchow
Email Address: kpetry@tax.state.wv.us