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 provide a state income tax exemption to retired federal employees retirement pensions.
The exemption of all federal retirement pensions from Personal Income Tax would reduce General Revenue Fund collections by approximately $9.5 million in FY2009. The anticipated retirements of members of the baby-boom generation will result in additional escalation of costs over time. This bill, as written, makes changes to the requirements to qualify for the $8,000 senior citizen decreasing modification. The revenue impact of these changes cannot be determined.
There would be no additional administrative costs associated with the change in the modification for current tax years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2008
Increase/Decrease
(use"-") |
2009
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 |
0 |
Explanation of above estimates (including long-range effect):
The exemption of all federal retirement pensions from Personal Income Tax would reduce General Revenue Fund collections by approximately $9.5 million in FY2009. The anticipated retirements of members of the baby-boom generation will result in additional escalation of costs over time. This bill, as written, makes changes to the requirements to qualify for the $8,000 senior citizen decreasing modification. The revenue impact of these changes cannot be determined because the changes made are not consistent.
There would be no additional administrative costs associated with the change in the modification for current tax years.
Memorandum
The stated purpose of this bill is to provide a state income tax exemption to retired federal employees retirement pensions.
In addition to creating the total pension income exclusion for all federal government retirement pensions, other than military pensions, the bill contains some changes to the limits of the additional $8,000 income exclusion for senior citizens and permanently disabled individuals. Subdivision (c)(9)(i) removes the $8,000 benefit limit for federal government retirement pensions in excess of $8,000 resulting in an additional senior citizen income exclusion of up to $8,000 for any federal retiree with a federal pension of $8,000 or more. However, subdivision (c)(9)(ii) requires any federal retirement pension under $8,000 to be counted against the additional $8,000 senior citizen income exclusion (Same as current Law). This language also affects those with military pensions. If the military pension is $8,000 or greater, there is no additional $8,000 senior citizen income exclusion (same as current Law). However, if the military pension is less than $8,000, then the amount of the pension does not count toward the $8,000 senior citizen exclusion. Finally, the potential income exclusion for a surviving spouse of an individual over age 65 or permanently disabled is doubled under the proposed changes in the bill. The fiscal impact associated with these changes was not calculated due to concern that such changes may have been unintended.
The provisions of this bill create significant additional disparity between retirees based either on the source of pension income or the size of pension income. One result may be additional legal challenges on the part of less favored retiree groups.
Person submitting Fiscal Note: Mark Muchow
Email Address: kpetry@tax.state.wv.us