Date Requested:January 24, 2008
Time Requested:03:44 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2008R1622 Introduced SB318
CBD Subject: Exempting Social Security Income from State Income Tax
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 exempt social security income from state income tax.
    
    This bill proposes a modification that would reduce federal adjusted gross income, for West Virginia Personal Income Tax purposes, by the amount of Social Security benefits paid. However, the current statute pertaining to reducing modifications (i.e., W. Va. Code §11-21-12(c)) limits subtractions from federal adjusted gross income to the extent the item is included in federal adjusted gross income. Based upon our interpretation that the reducing modification would be limited to taxable Social Security income (i.e., the amount included in federal adjusted gross income) and that the modification would apply to tax years beginning on or after January 1, 2009 due to the lack of an internal effective date, passage of this bill would reduce General Revenue Fund collections by roughly $39.8 million per year due to the exclusion of taxable social security benefits from the State personal income tax. Based upon anticipated estimated tax payment changes, collections would decrease by $10.0 million in Fiscal Year 2009 and by $39.8 million in Fiscal Year 2010. The value of this proposed tax exclusion will escalate over time as members of the baby-boom generation begin receiving Social Security benefits.
    
    There would be no additional costs to the State Tax Department.
    

Fiscal Note Detail
Over-all effect
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 -10,000,000 0
3. Explanation of above estimates (including long-range effect):
    This bill proposes a modification that would reduce federal adjusted gross income, for West Virginia Personal Income Tax purposes, by the amount of Social Security benefits paid. However, the current statute pertaining to reducing modifications (i.e., W. Va. Code §11-21-12(c)) limits subtractions from federal adjusted gross income to the extent the item is included in federal adjusted gross income.
    
    According to our interpretation, passage of this bill would reduce General Revenue Fund collections by at least $39.8 million per year due to the exclusion of taxable social security benefits from the State personal income tax. The proposed change takes effect for tax years beginning on or after January 1, 2009. Based upon anticipated estimated tax payment changes, collections would decrease by $10.0 million in Fiscal Year 2009 and by at least $39.8 million per year, thereafter.
    
    According to IRS Statistics of Income Data for Tax Year 2005, 73,451 West Virginia residents included nearly $626.2 million of social security benefits in adjusted gross income. Taxable social security benefits are expected to rise to roughly $861 million by 2009.
    
    There would be no additional costs to the State Tax Department.
    


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kpetry@tax.state.wv.us