FISCAL NOTE

Date Requested: February 08, 2017
Time Requested: 05:24 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1471 Introduced HB2127
CBD Subject: Taxation


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 make the personal exemptions of residents for purposes of West Virginia’s personal income tax the same as allowed for federal income tax purposes. According to our interpretation, for tax years beginning after December 31, 2016, the proposed bill would increase the amount of the personal exemption for Personal Income Tax purposes from $2,000 to the same amount allowed for federal income tax purposes. The federal exemption allowance is $4,050 for Tax Year 2017; this allowance is increased for most tax years. Based on the federal exemption allowance for Tax Year 2017, passage of this bill would reduce the General Revenue Fund by roughly $140.0 million in FY2018. The revenue loss would increase in subsequent fiscal years due to the annual increases in the federal exemption allowance. The provisions of this bill would decrease the tax liability for an estimated 98% of taxpayers, but would increase the liability of 2% of taxpayers due to a phase-out of their personal income tax allowance. Additional administrative cost incurred by the State Tax Department would be $6,000 a year for FY2018 and fiscal years thereafter.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2017
Increase/Decrease
(use"-")
2018
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 6,000 6,000
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 6,000 6,000
2. Estimated Total Revenues 0 -140,000,000 0


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


According to our interpretation, for tax years beginning after December 31, 2016, the proposed bill would increase the amount of the personal exemption for Personal Income Tax purposes from $2,000 to the same amount allowed for federal income tax purposes. The federal exemption allowance is $4,050 for Tax Year 2017; this allowance is increased for most tax years. Based on the federal exemption allowance for Tax Year 2017, passage of this bill would reduce the General Revenue Fund by roughly $140.0 million in FY2018. The revenue loss would increase in subsequent fiscal years due to the annual increases in the federal exemption allowance. The provisions of this bill would decrease the tax liability for an estimated 98% of taxpayers, but would increase the liability of 2% of taxpayers, due to a phase-out of their personal income tax allowance. Additional administrative cost incurred by the State Tax Department would be $6,000 a year for FY2018 and fiscal years thereafter.



Memorandum


The stated purpose of this bill is to provide personal exemption for state income tax the same as in federal income tax. As written, the proposed change would also result in a phase-out of the personal exemption allowance for those with federal adjusted gross income over $311,300 (joint), $285,350 (head of household), $259,400 (single) and $155,650 (married filing separately). For some higher income taxpayers, the proposed change would increase State tax liability due to a 50% or greater phase-out of their personal exemption allowance.



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kerri.r.petry@wv.gov