FISCAL NOTE
FUND(S):
General Revenue Fund, Revenue Shortfall Reserve Fund
Sources of Revenue:
General Fund,Other Fund Revenue Shortfall Reserve
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: 1) To reduce the Consumers Sales and Service Tax on food and food ingredients to 1.5%, beginning on January 1, 2012, (2) To reduce the Consumers Sales and Service Tax on food and food ingredients to 1%, beginning on January 1, 2013, contingent on specified levels of funding in the Revenue Shortfall Reserve Fund, 3) To terminate the Consumers Sales and Service Tax on food and food ingredients beginning January 1, 2014, contingent on specified levels of funding in the Revenue Shortfall Reserve Fund, and (4) To increase the cap on the amount of money that may be deposited in the Revenue Shortfall Reserve Fund from 10% to 15% of the total appropriations from the General Revenue, for the preceding fiscal year.
As written, this bill would lower the Consumers Sales and Service Tax rate on food and food ingredients for home consumption. According to our interpretation, passage of this bill would establish the tax rate on food and food ingredients for home consumption at 1.5 percent, effective January 1, 2012 with contingent tax rates of 1.0 percent effective January 1, 2013 and 0 percent effective January 1, 2014. Additionally, the bill would increase from 10 percent to 15 percent of the State General Revenue Fund the obligation of the Department of Revenue to apply half of any surplus revenues to the Revenue Shortfall Reserve Fund.
The proposed 1.5 percent tax rate and subsequent contingent rate reductions represent a reduction from the current tax rate of 3 percent and a reduction from the 2 percent tax rate that was previously enacted for implementation January 1, 2012 and included in the Governor's official revenue estimates for FY2012. The following schedule assumes that the fiscal year ending balance in the Revenue Shortfall Reserve Fund will be sufficient to allow the contingent tax rate reductions to occur at the earliest possible dates as specified in the bill. However, there are no guarantees that the fiscal year ending balance in the Revenue Shortfall Reserve Fund will meet the target specified in the bill.
Estimated
Rate Reduction
From 3% Rate
Fiscal Year Revenue Impact
2012 $16.5 million
2013 $44.4 million
2014 $62.8 million
2015+ $78.0 million
Rate Reduction
3% to 2%
Fiscal Year Revenue Impact
2012 $11.0 million
2013 $26.0 million
2014 $26.0 million
2015+ $26.0 million
This Bill
Fiscal Year Net Impact
2012 $ 5.5 million
2013 $18.4 million
2014 $36.8 million
2015+ $52.0 million
The State Tax Department had previously estimated that the tax rate reduction from 3 percent to 2 percent would increase administrative costs by roughly $74,000 in FY2012 due to notifying taxpayers of the rate change and for programming changes. While the proposed rate reduction to 1.5 percent on January 1, 2012 would result in only minimal additional administrative costs above that for the scheduled reduction to 2 percent, the additional rate reductions would require new taxpayer notifications and programming changes. Additional administrative costs for the contingent rate reductions would be roughly $74,000 for each rate change.
Fiscal Note Detail
Effect of Proposal |
Fiscal Year |
2011 Increase/Decrease (use"-") |
2012 Increase/Decrease (use"-") |
Fiscal Year (Upon Full Implementation) |
1. Estmated Total Cost |
0 |
0 |
74,000 |
Personal Services |
0 |
0 |
0 |
Current Expenses |
0 |
0 |
48,000 |
Repairs and Alterations |
0 |
0 |
0 |
Assets |
0 |
0 |
0 |
Other |
0 |
0 |
26,000 |
2. Estimated Total Revenues |
0 |
-5,500,000 |
-52,000,000 |
Explanation of above estimates (including long-range effect):
The stated purpose of this bill is: 1) To reduce the Consumers Sales and Service Tax on food and food ingredients to 1.5%, beginning on January 1, 2012, (2) To reduce the Consumers Sales and Service Tax on food and food ingredients to 1%, beginning on January 1, 2013, contingent on specified levels of funding in the Revenue Shortfall Reserve Fund, 3) To terminate the Consumers Sales and Service Tax on food and food ingredients beginning January 1, 2014, contingent on specified levels of funding in the Revenue Shortfall Reserve Fund, and (4) To increase the cap on the amount of money that may be deposited in the Revenue Shortfall Reserve Fund from 10% to 15% of the total appropriations from the General Revenue, for the preceding fiscal year.
As written, this bill would lower the Consumers Sales and Service Tax rate on food and food ingredients for home consumption. According to our interpretation, passage of this bill would establish the tax rate on food and food ingredients for home consumption at 1.5 percent, effective January 1, 2012 with contingent tax rates of 1.0 percent effective January 1, 2013 and 0 percent effective January 1, 2014. Additionally, the bill would increase from 10 percent to 15 percent of the State General Revenue Fund the obligation of the Department of Revenue to apply half of any surplus revenues to the Revenue Shortfall Reserve Fund.
The proposed 1.5 percent tax rate and subsequent contingent rate reductions represent a reduction from the current tax rate of 3 percent and a reduction from the 2 percent tax rate that was previously enacted for implementation January 1, 2012 and included in the Governor's official revenue estimates for FY2012. The following schedule assumes that the fiscal year ending balance in the Revenue Shortfall Reserve Fund will be sufficient to allow the contingent tax rate reductions to occur at the earliest possible dates as specified in the bill. However, there are no guarantees that the fiscal year ending balance in the Revenue Shortfall Reserve Fund will meet the target specified in the bill.
Estimated
Rate Reduction
From 3% Rate
Fiscal Year Revenue Impact
2012 $16.5 million
2013 $44.4 million
2014 $62.8 million
2015+ $78.0 million
Rate Reduction
3% to 2%
Fiscal Year Revenue Impact
2012 $11.0 million
2013 $26.0 million
2014 $26.0 million
2015+ $26.0 million
This Bill
Fiscal Year Net Impact
2012 $ 5.5 million
2013 $18.4 million
2014 $36.8 million
2015+ $52.0 million
The State Tax Department had previously estimated that the tax rate reduction from 3 percent to 2 percent would increase administrative costs by roughly $74,000 in FY2012 due to notifying taxpayers of the rate change and for programming changes. While the proposed rate reduction to 1.5 percent on January 1, 2012 would result in only minimal additional administrative costs above that for the scheduled reduction to 2 percent, the additional rate reductions would require new taxpayer notifications and programming changes. Additional administrative costs for the contingent rate reductions would be roughly $74,000 for each rate change.
Memorandum
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov