Date Requested: January 26, 2015
Time Requested: 02:08 PM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
2257 Introduced HJR5
CBD Subject: Const. Amendments


FUND(S):

General Revenue Fund, local governments

Sources of Revenue:

General Fund,Other Fund local property tax

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 resolution is to increase the homestead exemption from $20,000 to $40,000.
    
    The increase in the Homestead Exemption from $20,000 to $40,000 would initially result in a revenue loss of $35.0 million annually for local levying bodies and an increase of $1.3 million in General Revenue Fund collections. The number of senior citizens is expected to grow by nearly 37 percent over the next decade. Homestead Exemption costs will rise in similar fashion over the next decade.
    
    In most counties, decreased tax revenue due to an increase in the Homestead Exemption would likely be at least partially offset by higher tax rates and tax burdens on other types of property, including both real property taxes and personal property taxes on vehicles, business inventory, machinery and equipment.
    
    There would be a one-time cost of $30,000 to the State Tax Department for programming changes and changing and printing the Homestead Exemption forms. There would be no additional costs to local governments.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2015
Increase/Decrease
(use"-")
2016
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):


    The increase in the Homestead Exemption would initially result in a loss of $35.0 million in local property tax revenue. General Revenue Fund collections would increase by $1.3 million as the $140,000 decline in State property tax revenue would be offset by a gain in Personal Income Tax collections. As the level of the Homestead Exemption rises, the number of taxpayers who owe property taxes on their home declines. Therefore, the cost of the refundable property tax credit against Personal Income Tax liability for lower income households would also decline.
    
    These estimates are based upon the assumption of no tax rate changes on the part of county commissions, municipalities and voters. In most counties, decreased tax revenue due to an increase in the Homestead Exemption would likely be at least partially offset by higher tax rates and tax burdens on other types of property, including both real property taxes and personal property taxes on vehicles, business inventory, machinery and equipment. Twenty-one county commissions, numerous municipalities (e.g. Charleston), and thirty-three school boards (excess levies) currently impose tax rates below their allowed constitutional caps. Some of these authorities may raise tax rates to partially offset any local revenue loss.
    
    There would be a one-time cost of $30,000 to the State Tax Department for programming changes and changing and printing the Homestead Exemption forms. There would be no additional costs to local governments.
    



Memorandum


    



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