FISCAL NOTE
Date Requested: March 08, 2017
Time Requested: 12:55 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2365 |
Introduced |
HB2824 |
|
|---|
| CBD Subject: |
Retirement |
|---|
|
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 exempt State Teachers Retirement System pension benefits from West Virginia personal income tax.
The bill, as written, exempts all pensions benefits from the State Teachers’ Retirement System. According to our interpretation, the provisions of this bill would be retroactive to Tax Year 2015. Based upon the above interpretation, passage of this bill would reduce General Revenue Fund collections by roughly $52.4 million in FY2018 and by $17.5 million in FY2019. The large reduction in FY2018 collections would be mainly attributable to roughly $34.5 million in refunds attributable to refunds for amended tax years 2015 and 2016. The annual cost of this proposed tax exclusion will escalate over time as members of the baby-boom generation begin receiving Social Security benefits.
Since passage of this bill would result in the processing of additional refunds in FY2018, additional costs attributable to the processing of these refunds would be significant. Also, additional litigation by less favored groups would result in a significant increase in administrative costs to the State Tax Department. In particular, additional preferential treatment for a large group of state and local government retirees relative to federal civil service retirees might conflict with the U.S. Supreme Court ruling in Davis v. Michigan.
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 |
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 |
0 |
Explanation of above estimates (including long-range effect):
The bill, as written, exempts all pensions benefits from the State Teachers’ Retirement System. According to our interpretation, the provisions of this bill would be retroactive to Tax Year 2015. Based upon the above interpretation, passage of this bill would reduce General Revenue Fund collections by roughly $52.4 million in FY2018 and by $17.5 million in FY2019. The large reduction in FY2018 collections would be mainly attributable to roughly $34.5 million in refunds attributable to refunds for amended tax years 2015 and 2016. The annual cost of this proposed tax exclusion will escalate over time as members of the baby-boom generation begin receiving Social Security benefits.
Since passage of this bill would result in the processing of additional refunds in FY2018, additional costs attributable to the processing of these refunds would be significant. Also, additional litigation by less favored groups would result in a significant increase in administrative costs to the State Tax Department. In particular, additional preferential treatment for a large group of state and local government retirees relative to federal civil service retirees might conflict with the U.S. Supreme Court ruling in Davis v. Michigan.
Memorandum
The stated purpose of this bill is to exempt State Teachers Retirement System pension benefits from West Virginia personal income tax.
There is concern that additional preferential treatment for a large group of state and local government retirees relative to federal civil service retirees might conflict with the U.S. Supreme Court ruling in Davis v. Michigan.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov