FISCAL NOTE
Date Requested: February 12, 2025
Time Requested: 08:08 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2601 |
Introduced |
HB2139 |
|
|---|
| 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.
The stated purpose of this bill is to exempt cash tips from West Virginia personal income tax.
According to our interpretation, cash tips from any source would be exempt from the State Personal Income Tax. Assuming no behavioral modification on the part of taxpayers and their employers, an income tax exclusion for all tip income would reduce State revenues by approximately $5.0 million per year. If the exclusion is restricted to only cash tips, the reduction in tax revenue would be closer to $1.0 million per year. Actual costs will likely be higher due to possible conversions of some wage incomes toward greater tip income due to the tax preference .
Additional administrative costs incurred by the State Tax Department would be $16,500 in FY2025, $93,000 in FY2026, and $90,000 per year in FY2027 and 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 |
16,500 |
93,000 |
90,000 |
| Personal Services |
0 |
90,000 |
90,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
3,000 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
16,500 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
-1,000,000 |
-1,000,000 |
Explanation of above estimates (including long-range effect):
According to our interpretation, cash tips from any source would be exempt from the State Personal Income Tax. Assuming no behavioral modification on the part of taxpayers and their employers, an income tax exclusion for all tip income would reduce State revenues by approximately $5.0 million per year. If the exclusion is restricted to only cash tips, the reduction in tax revenue would be closer to $1.0 million per year. Actual costs will likely be higher due to possible conversions of some wage incomes toward greater tip income due to the tax preference .
Under current law, roughly 2.5 percent of all employment involves workers in tipped occupations, and tips account for roughly 0.5 percent of total wage and salary income.
Additional administrative costs incurred by the State Tax Department would be $16,500 in FY2025, $93,000 in FY2026, and $90,000 per year in FY2027 and subsequent fiscal years.
Memorandum
The stated purpose of this bill is to exempt cash tips from West Virginia personal income tax.
This bill would be difficult to implement. A decreasing State Personal Income Tax modification may work better than an exemption. It is also not clear from the bill’s language, whether tips included as part of a credit card purchase are included in “cash tips received from any source”.
Person submitting Fiscal Note: Mark Muchow
Email Address: RADfiscal@wv.gov