Date Requested: February 06, 2015
Time Requested: 02:54 PM
Agency: Tax Department, State
CBD Number: Version: Bill Number: Resolution Number:
2796 Introduced HB2639
CBD Subject: Tax


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 abolish personal income tax.
    
    According to our interpretation, the provisions of this bill would repeal the Personal Income Tax, but not the Corporation Net Income Tax, effective January 1, 2016. The following estimates reflect the fiscal impact of the personal income tax repeal in isolation, but not any other unintended consequences associated with the lack of any proposed replacement funding to maintain State and local government services currently funded through the income tax. Passage of this bill would reduce annual General Revenue Fund collections by more than $2.0 billion beginning in FY2017. In addition, FY2016 General Revenue Fund collections would decrease by more than $1.0 billion due to the loss of both withholding and estimated tax collections associated with activity occurring on or after January 1, 2016. Tax refunds would also be larger than usual in the refund filing season during the second half of FY2016 and early FY2017 due to the return of estimated carryover payments from prior years to Taxpayers.
    
    It is assumed that monthly $10.6 million revenue transfers from the General Revenue Fund to the Old Workers' Compensation Debt Fund would continue at least through the end of FY2016 despite the lack of incoming personal income tax revenues during the second half of the fiscal year. Otherwise, temporary taxes for other businesses would continue for a longer than originally anticipated timeframe.
    
    In addition to the revenue loss to the State General Revenue Fund, passage of this bill would effectively eliminate any future funding for Other Post-Employment Benefits (OPEB) as contemplated in current Law. Current Law provides for the annual transfer of $30 million in personal income tax collections to an OPEB trust fund and an additional $5 million to a yet to be determined benefit program beginning in the fiscal year following the year of final payment of obligations related to the Old Workers' Compensation Debt Fund.
    
    There will be additional administrative costs of $100,000 in FY2016 for refunds of estimated payments. In subsequent fiscal years, there will be a savings of $1.8 million per year.
    



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 0 100,000 -1,745,000
Personal Services 0 0 -825,000
Current Expenses 0 0 -920,000
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 100,000 0
2. Estimated Total Revenues 0 0 0


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


    According to our interpretation, the provisions of this bill would repeal the Personal Income Tax, but not the Corporation Net Income Tax, effective January 1, 2016. The following estimates reflect the fiscal impact of the personal income tax repeal in isolation, but not any other unintended consequences associated with the lack of any proposed replacement funding to maintain State and local government services currently funded through the income tax. Passage of this bill would reduce annual General Revenue Fund collections by more than $2.0 billion beginning in FY2017. In addition, FY2016 General Revenue Fund collections would decrease by more than $1.0 billion due to the loss of both withholding and estimated tax collections associated with activity occurring on or after January 1, 2016. Tax refunds would also be larger than usual in the refund filing season during the second half of FY2016 and early FY2017 due to the return of estimated carryover payments from prior years to Taxpayers.
    
    It is assumed that monthly $10.6 million revenue transfers from the General Revenue Fund to the Old Workers' Compensation Debt Fund would continue at least through the end of FY2016 despite the lack of incoming personal income tax revenues during the second half of the fiscal year. Otherwise, temporary taxes for other businesses would continue for a longer than originally anticipated timeframe.
    
    In addition to the revenue loss to the State General Revenue Fund, passage of this bill would effectively eliminate any future funding for Other Post-Employment Benefits (OPEB) as contemplated in current Law. Current Law provides for the annual transfer of $30 million in personal income tax collections to an OPEB trust fund and an additional $5 million to a yet to be determined benefit program beginning in the fiscal year following the year of final payment of obligations related to the Old Workers' Compensation Debt Fund.
    
    There will be additional administrative costs of $100,000 in FY2016 for refunds of estimated payments. In subsequent fiscal years, there will be a savings of $1.8 million per year.
    
    



Memorandum


    



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