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 an earned income tax credit from state personal income tax for taxpayers with qualifying children. The earned income credit is equal to twenty percent of the federal credit.
As written, this bill would create a tax credit equal to 20 percent of the federal earned income tax credit for taxpayers with one or more qualifying children that can be used against the Personal Income Tax. The bill provides that the credit, effective for tax years beginning on or after January 1, 2009, is allowed to offset the Personal Income Tax, as reduced by other credits (e.g., the Family Tax Credit from W. Va. Code §11-21-22). Also, the bill provides that any credit in excess of tax liability, as reduced by other credits, is to be disregarded. According to our interpretation of this bill and based upon new federal earned income tax credit parameters as recently enacted in the American Recovery and Reinvestment Act of 2009, passage of this bill would result in a reduction in the General Revenue Fund of roughly $28 million to $32 million per year. The bill also requires the State Tax Commissioner to make efforts every year to alert taxpayers who may be eligible for the credit and to prepare a written report each year containing statistical information regarding credit granted for the prior calendar year.
Additional administrative costs to the State Tax Department associated with this bill would be roughly $50,000 per year.
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 |
50,000 |
50,000 |
Personal Services |
0 |
0 |
0 |
Current Expenses |
0 |
50,000 |
50,000 |
Repairs and Alterations |
0 |
0 |
0 |
Assets |
0 |
0 |
0 |
Other |
0 |
0 |
0 |
2. Estimated Total Revenues |
0 |
-32,000,000 |
-32,000,000 |
Explanation of above estimates (including long-range effect):
The stated purpose of this bill is to provide an earned income tax credit from state personal income tax for taxpayers with qualifying children. The earned income credit is equal to twenty percent of the federal credit.
As written, this bill would create a tax credit equal to 20 percent of the federal earned income tax credit for taxpayers with one or more qualifying children that can be used against the Personal Income Tax. The bill provides that the credit, effective for tax years beginning on or after January 1, 2009, is allowed to offset the Personal Income Tax, as reduced by other credits (e.g., the Family Tax Credit from W. Va. Code §11-21-22). Also, the bill provides that any credit in excess of tax liability, as reduced by other credits, is to be disregarded. According to our interpretation of this bill and based upon new federal earned income tax credit parameters as recently enacted in the American Recovery and Reinvestment Act of 2009, passage of this bill would result in a reduction in the General Revenue Fund of roughly $28 million to $32 million per year. The bill also requires the State Tax Commissioner to make efforts every year to alert taxpayers who may be eligible for the credit and to prepare a written report each year containing statistical information regarding credit granted for the prior calendar year.
Additional administrative costs to the State Tax Department associated with this bill would be roughly $50,000 per year.
Memorandum
The stated purpose of this bill is to provide an earned income tax credit from state personal income tax for taxpayers with qualifying children. The earned income credit is equal to twenty percent of the federal credit.
The bill, as written, uses key terms such as “qualifying child” and “earned income credit” without providing definitions of the terms.
Person submitting Fiscal Note: Mark Muchow
Email Address: kpetry@tax.state.wv.us