Date Requested:February 16, 2005
Time Requested:01:13 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2005R133 Intro HB2144
CBD Subject: Personal Income Exemption
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 an increase in the earned income exclusion for personal income tax purposes in the amount of the poverty guidelines updated annually by the United States Department of Health and Human Services. It also excludes income received from unemployment compensation, workers’ compensation, Social Security and similar benefits when determining earned income.
    
    According to our interpretation, passage of this bill would result in a decrease in General Revenue Fund collections of roughly $15.5 million in Fiscal Year 2006 and at least $38.0 million in Fiscal Year 2007 and each year thereafter. The bill would become effective for the 2006 tax year and may result in lower withholding tax payments during the second half of Fiscal Year 2006.
    
    This bill would generally raise the eligibility income for the low-income exclusion from $10,000 of federal adjusted gross income to federal adjusted gross income equal to 150 percent of the federal poverty threshold (e.g., from $10,000 to $29,025 for a family of four based upon the 2005 poverty income guidelines). The bill would also raise the maximum low-income exclusion level from $10,000 to an amount equal to 100 percent of the poverty income level (e.g., $19,350 for a family of four). This change would reduce or eliminate income tax payments for approximately 120,000 taxpayers. However, there would be no change in tax liability for anyone with income in excess of 150 percent of the federal poverty level.
    
    Due to complexity, passage of this bill would increase administrative costs to the Tax Department by at least $52,000 in Fiscal Year 2006 and $100,000 each year thereafter.

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2005
Increase/Decrease
(use"-")
2006
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 52,000 100,000
Personal Services 0 0 75,000
Current Expenses 0 30,000 25,000
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 22,000 0
2. Estimated Total Revenues 0 -15,500,000 -38,000,000
3. Explanation of above estimates (including long-range effect):
    This bill would generally raise the eligibility income for the low-income exclusion from $10,000 of federal adjusted gross income to federal adjusted gross income equal to 150 percent of the federal poverty threshold (e.g., from $10,000 to $29,025 for a family of four based upon the 2005 poverty income guidelines). The bill would also raise the maximum low-income exclusion level from $10,000 to an amount equal to 100 percent of the poverty income level (e.g., $19,350 for a family of four). This change would reduce or eliminate income tax payments for approximately 120,000 taxpayers. However, there would be no change in tax liability for anyone with income in excess of 150 percent of the federal poverty level.
    
    According to our interpretation, passage of this bill would result in a decrease in General Revenue Fund collections of roughly $15.5 million in Fiscal Year 2006 and at least $38.8 million in Fiscal Year 2007 and each year thereafter.
    
    Due to complexity, passage of this bill would increase administrative costs to the Tax Department by at least $52,000 in Fiscal Year 2006 and $100,000 each year thereafter.


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