FISCAL NOTE
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 provide a state tax deduction for amounts paid for health insurance. The bill provides up to an $8,000 tax deduction from taxable income for amounts paid for certain health insurance plans not backed by an employer or state or federal government.
As written, the bill would allow an $8,000 deduction from federal adjusted gross income for those taxpayers with a health insurance plan not backed by a private employer or state or federal government. The deduction would be available to qualifying taxpayers for tax years beginning on or after January 1, 2009.
Due to the wide variety of health insurance plan options available, the State Tax Department is unable to accurately estimate the potential General Revenue Fund reduction that would result from passage of this bill. However, since the U.S. Census Bureau’s report entitled Income, Poverty, and Health Insurance Coverage in the United States: 2007 indicates that nearly 8.9 percent of the U.S. population had private insurance that was not employment-based, the potential revenue loss could be significant.
Assuming that all Personal Income Tax returns claiming the proposed deduction would be accepted as filed, additional administrative costs to the State Tax Department attributable to passage of this bill would be minimal. However, if any verification of the credit claim is required, the additional administrative costs could be significant.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2009
Increase/Decrease
(use"-") |
2010
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):
As written, the bill would allow an $8,000 deduction from federal adjusted gross income for those taxpayers with a health insurance plan not backed by a private employer or state or federal government. The deduction would be available to qualifying taxpayers for tax years beginning on or after January 1, 2009.
Due to the wide variety of health insurance plan options available, the State Tax Department is unable to accurately estimate the potential General Revenue Fund reduction that would result from passage of this bill. However, since the U.S. Census Bureau’s report entitled Income, Poverty, and Health Insurance Coverage in the United States: 2007 indicates that nearly 8.9 percent of the U.S. population had private insurance that was not employment-based, the potential revenue loss could be significant.
Assuming that all Personal Income Tax returns claiming the proposed deduction would be accepted as filed, additional administrative costs to the State Tax Department attributable to passage of this bill would be minimal. However, if any verification of the credit claim is required, the additional administrative costs could be significant.
Memorandum
The stated purpose of this bill is to provide a state tax deduction for amounts paid for health insurance. The bill provides up to an $8,000 tax deduction from taxable income for amounts paid for certain health insurance plans not backed by an employer or state or federal government.
The proposed bill uses the phrase “deduction” when what is actually being proposed is a decreasing modification to federal adjusted gross income. There is no provision in the bill for the deduction to be limited to actual cost with a limit of $8,000. It is possible that the language could be interpreted as an $8,000 deduction even when the actual cost of the insurance is much less. Also, the bill uses the term “health insurance plan” without providing a definition.
Person submitting Fiscal Note: Mark Muchow
Email Address: kpetry@tax.state.wv.us