FISCAL NOTE
Date Requested: February 18, 2025
Time Requested: 04:40 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1464 |
Introduced |
HB2553 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund
Sources of Revenue:
General Fund
Legislation creates:
Decreases Existing Revenue, Increases Existing Expenses
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
Summarize in a clear and concise manner what impact this measure will have on costs and revenues of state government.
The stated purpose of this bill is to exempt the first $20,000 of income of resident individuals from personal income taxation.
According to our interpretation, the bill would create an additional modification reducing the federal adjusted gross income of a West Virginia resident individual in the amount of $20,000. The legislation would be effective for all taxable years beginning on and after January 1, 2025.
Based on our interpretation, current filing trends, and previously enacted Personal Income Tax changes, the proposed legislation would decrease General Revenue Fund collections by a minimal amount in FY2025, $455.0 million in FY2026, and by increasing amounts in subsequent fiscal years. Currently only a small portion of married taxpayers file separately. If both spouses have taxable income, they could potentially reduce their total tax liability by filing separately. If the majority of taxpayers who currently file joint returns elect to file separately to take advantage of the tax savings, the decline in General Revenue Fund collections could increase by as much as $100 million per year.
Additional administrative costs incurred by the State Tax Department would be $135,300 in FY2026 and $99,000 in subsequent fiscal years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2025
Increase/Decrease
(use"-") |
2026
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
135,300 |
99,000 |
| Personal Services |
0 |
99,000 |
99,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
3,300 |
0 |
| Other |
0 |
33,000 |
3 |
| 2. Estimated Total Revenues |
3 |
-455,300,000 |
-471,900,000 |
Explanation of above estimates (including long-range effect):
Please explain increases and decreases in personal services, current expenses, repairs and alterations, assets, other costs and revenues, including assumptions and data sources and delineation between start-up and ongoing costs. Please also include a long-range schedule of costs and revenues if fiscal impact is expected to vary in future years.
According to our interpretation, the bill would create an additional modification reducing the federal adjusted gross income of a West Virginia resident individual in the amount of $20,000. The legislation would be effective for all taxable years beginning on and after January 1, 2025.
Based on our interpretation, current filing trends, and previously enacted Personal Income Tax changes, the proposed legislation would decrease General Revenue Fund collections by a minimal amount in FY2025, $455.3 million in FY2026, and by increasing amounts in subsequent fiscal years. Currently only a small portion of married taxpayers file separately. If both spouses have taxable income, they could potentially reduce their total tax liability by filing separately. If the majority of taxpayers who currently file joint returns elect to file separately to take advantage of the tax savings, the decline in General Revenue Fund collections could increase by as much as $100 million per year.
Additional administrative costs incurred by the State Tax Department would be $135,300 in FY2026 and $99,000 in subsequent fiscal years.
Memorandum
Please identify any areas of vagueness, technical defects, reasons a bill would not have a fiscal impact, and/or any special issues not captured elsewhere on this form.
The stated purpose of this bill is to exempt the first $20,000 of income of resident individuals from personal income taxation.
The bill has a title defect. The title provided states:
“A BILL amend the Code of West Virginia, 1931, as amended, by adding thereto a new section designated §11-21-12o, relating to exempting the first $20,000 of income of resident individuals from personal income taxation.”
This bill actually provides an additional modification reducing federal adjusted gross income, which is not the same as a tax exemption. The title of this bill does not match the operative language of the legislation. Furthermore, the language of the reducing modification is confusing, in that it refers to “the first $20,000 of income,” while a true reducing modification applies regardless of whether the amount is the first, second, or last $20,000 of income received by the taxpayer.
Person submitting Fiscal Note: Mark Muchow
Email Address: radfiscal@wv.gov