Date Requested: January 29, 2015
Time Requested: 09:08 AM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
1282 Introduced HJR13
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 amendment is to allow each county to increase the homestead exemption from $20,000 to an amount not to exceed $50,000 or an amount equal to fifty percent of the average property value in the county, whichever is greater.
    
    The proposed amendment would allow each county the option to increase the Homestead Exemption from $20,000 to an amount not to exceed $50,000 or an amount equal to fifty percent of the average residential property value. The impact of this proposal on State and local property tax revenue cannot be determined because the proposal does not change the Homestead Exemption to any specific amount. If all counties increased the Homestead Exemption to $50,000, the estimated revenue loss would be roughly $11.2 million to the State General Revenue Fund, $17.3 million to local county school boards, $12.5 million to county commissions and $3.4 million to municipalities. The distribution of estimated cost is based on information from taxes levied as reported in the FY 2015 Classified Assessed Valuations Taxes Levied publication of the State Tax Department and the incorporation of the calculation of local property tax share within the State Aid to Schools Formula.
    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. Additional administrative costs to local governments cannot be determined.



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 proposed amendment would allow each county the option to increase the Homestead Exemption from $20,000 to an amount not to exceed $50,000 or an amount equal to fifty percent of the average residential property value. The impact of this proposal on State and local property tax revenue cannot be determined because the proposal does not change the Homestead Exemption to any specific amount. If all counties increased the Homestead Exemption to $50,000, the increase in the Homestead Exemption would initially result in a loss of $17.3 million to local county school boards, $12.5 million to county commissions and $3.4 million to municipalities. General Revenue Fund collections would decrease by $11.4 million as the $13.9 decline in State property tax revenue would more than offset by a gain in Personal Income Tax collections. The distribution of estimated cost is based on information from taxes levied as reported in the FY 2015 Classified Assessed Valuations Taxes Levied publication of the State Tax Department and the incorporation of the calculation of local property tax share within the State Aid to Schools Formula. 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. Additional administrative costs to local governments cannot be determined.



Memorandum


    The stated purpose of this amendment is to allow each county to increase the homestead exemption from $20,000 to an amount not to exceed $50,000 or an amount equal to fifty percent of the average property value in the county, whichever is greater.
    
    By allowing each county to set its own Homestead Exemption amount with approval from the Legislature and the voters of the county, the proposed amendment would be inconsistent with West Virginia Constitution Article X, Section 1 by creating unequal taxation among counties of the State.
    



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