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 exempt the first $10,000 of state pensions and social security benefits from West Virginia personal income tax with an increase to $15,000 for retirees who are sixty-five years old or older. The bill increases the current $2,000 pension income exclusion to the first $12,000 of pension income for PERS, the Teachers’ Retirement System and federal retirees who are under the age of sixty-five. In addition, the bill increases the pension income exclusion to the first $15,000 of pension income for retirees from both PERS and the Teachers’ Retirement System (but not federal retirees) who are over age sixty-five. The bill, as written, allows the $8,000 senior citizens modification in addition to the decreasing modification only for federal retirees and retirees receiving benefits from PERS or the West Virginia Teachers’ Retirement System. The provisions of this bill would reduce General Revenue Fund collections by roughly $20.6 million in FY2011. The anticipated retirements of members of the baby-boom generation will result in additional escalation of costs over time. The bill does not exempt the first $10,000 of social security benefits as stated in the purpose. There would be no additional administrative costs associated with the change in the modification for current tax years.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2010
Increase/Decrease
(use"-")
2011
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 -20,600,000 0


Explanation of above estimates (including long-range effect):


The bill increases the current $2,000 pension income exclusion to the first $12,000 of pension income for PERS, the Teachers’ Retirement System and federal retirees who are under the age of sixty-five. In addition, the bill increases the pension income exclusion to the first $15,000 of pension income for retirees from both PERS and the Teachers’ Retirement System who are over age sixty-five but only increases the pension income exclusion to the first $12,000 of pension income for federal retirees. The bill, as written, allows the $8,000 senior citizens modification in addition to the decreasing modification only for federal retirees and retirees receiving benefits from PERS or the West Virginia Teachers’ Retirement System. The provisions of this bill would reduce General Revenue Fund collections by roughly $20.6 million in FY2011. The anticipated retirements of members of the baby-boom generation will result in additional escalation of costs over time. The bill does not exempt the first $10,000 of social security benefits as stated in the purpose. There would be no additional administrative costs associated with the change in the modification for current tax years.



Memorandum


The stated purpose of this bill is to exempt the first $10,000 of state pensions and social security benefits from West Virginia personal income tax with an increase to $10,000 for retirees who are sixty-five years old or older. The bill does not exempt the first $10,000 of social security benefits as stated in the purpose. The bill retains the current subdivision (5) which states that the decreasing modification for “annuities, retirement allowances, returns of contributions and any other benefit received under the West Virginia Public Employees’ Retirement System, the West Virginia State Teachers’ Retirement System” is limited to the first $2,000 of benefits received under those listed systems, “notwithstanding any provisions of this code to the contrary.” The bill does not strike this language and proposes a new subdivision (8), allowing for a modification limited to the first $20,000 of such retirement income, as well as benefits received under 4 U.S.C. §111. The bill also leaves intact the current subdivision (8), which provides for a decreasing modification of $8,000 for senior citizens and persons who are totally and permanently disabled. The bill, as written, allows the $8,000 senior citizens modification in addition to the decreasing modification only for federal retirees and retirees receiving benefits from PERS or the West Virginia Teachers’ Retirement System. As drafted, the proposed changes add significant confusion and significant disparity to the treatment of pension income for alternative groups of retirees and would likely result in provisions that are contrary to the 1989 U.S. Supreme Court ruling in Davis vs. Michigan.



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kerri.r.petry@wv.gov