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 create an exemption from West Virginia income tax for certain severance pay.
According to our interpretation, passage of this bill would provide Taxpayers whose position was permanently terminated by their employer through a reduction in force through no fault of the employee a decreasing modification for purposes of the Personal Income Tax of up to $30,000. The modification would be for monetary compensation paid by the employer as a result of the permanent termination of the employee’s position that is in excess of the employee’s regular annual wages or regular annual salary. The modification would be applicable to severance pay received on or after the date of passage of the bill. Based upon recent projections of West Virginia employment declines and an estimated average modification, passage of this bill would likely reduce the General Revenue Fund by $5 million to $10 million in Fiscal Year 2010. Deteriorating economic conditions could significantly increase the revenue impact of this bill.
Additional administrative costs to the State Tax Department associated with this bill would be minimal.
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 |
-10,000,000 |
0 |
Explanation of above estimates (including long-range effect):
Passage of this bill would provide Taxpayers whose position was permanently terminated by their employer through a reduction in force through no fault of the employee a decreasing modification for purposes of the Personal Income Tax of up to $30,000. The modification would be for monetary compensation paid by the employer as a result of the permanent termination of the employee’s position that is in excess of the employee’s regular annual wages or regular annual salary. The modification would be applicable to severance pay received on or after the date of passage of the bill. Based upon recent projections of West Virginia employment declines and an estimated average modification, passage of this bill would likely reduce the General Revenue Fund by $5 million to $10 million in Fiscal Year 2010. Deteriorating economic conditions could significantly increase the revenue impact of this bill.
In early February 2009, one forecast of West Virginia employment indicated a decline of 12,700 from 2008 to 2009 with additional declines in 2010. Even in the periods of overall employment growth, there may be some taxpayers who will have their positions terminated.
Additional administrative costs to the State Tax Department associated with this bill would be minimal.
Memorandum
Person submitting Fiscal Note: Mark Muchow
Email Address: kpetry@tax.state.wv.us