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 allow a federal adjusted gross income deduction of up to $15,000 for the amount spent on health insurance. As written, the passage of this bill would result in a reduction in Personal Income Tax revenue by roughly $26.9 million per year beginning in FY2011. There would be no additional administrative costs to the State Tax Department.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2009
Increase/Decrease
(use"-")
2010
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 -26,900,000


Explanation of above estimates (including long-range effect):


The stated purpose of this bill is to allow a federal adjusted gross income deduction of up to $15,000 for the amount spent on health insurance. According to the US Census Bureau’s Statistical Abstract of the United States: 2009, approximately 3.0 percent of all individual expenditures are for health insurance. Also, the US Census Bureau’s publication entitled Income, Poverty, and Health Insurance Coverage in the United States: 2007 reports that nationwide nearly 8.9 percent of individuals pay for their own insurance (i.e., they do not obtain insurance through the government, their employer or their union) and that roughly 14.1 percent of West Virginia residents do not have health insurance coverage. Using the above information as assumptions in a computer simulation, the provision of a Personal Income Tax modification for health insurance of up to $15,000 would reduce State revenue by roughly $26.9 million per year beginning in FY2011. These estimates do not incorporate any change in individual taxpayer behavior (e.g., additional taxpayers purchasing health insurance) or any change in business taxpayer behavior (e.g., reducing health insurance coverage). There would be no additional administrative costs to the State Tax Department from the passage of this bill.



Memorandum


The stated purpose of this bill is to allow a federal adjusted gross income deduction of up to $15,000 for the amount spent on health insurance. The purposed bill uses the phrase “deduction” when what is actually being proposed is a decreasing modification to federal adjusted gross income. The language of the bill does not expressly exclude employee health insurance costs already excluded from income taxation under an employer-sponsored cafeteria plan.



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