Date Requested: February 12, 2015
Time Requested: 01:06 PM
Agency: Tax Department, State
CBD Number: Version: Bill Number: Resolution Number:
2897 Introduced HB2709
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 exempt a percentage of social security benefits from personal income tax based on individual’s overall amount of taxable income.
    
    According to the provisions of the bill, a percentage of Social Security benefits would be subtracted from the taxpayer’s federal adjusted gross income for West Virginia Personal Income Tax purposes. It does not limit the amount to be subtracted to taxable Social Security benefits; non-taxable Social Security benefits are not included in federal adjusted gross income. The amount to be subtracted is based on overall gross income. If only taxable Social Security benefits were included in the proposed State tax exclusion, General Revenue Fund collections would be reduced by roughly $37.0 million in FY2017. The value of this proposed tax exclusion will escalate over time as members of the baby-boom generation begin receiving Social Security benefits.
    
    Additional administrative costs incurred by the State Tax Department would be $25,500 in FY2016 and $10,000 in subsequent fiscal years.



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 25,500 10,000
Personal Services 0 10,000 10,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 10,500 0
Other 0 5,000 0
2. Estimated Total Revenues 0 0 0


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


    According to the provisions of the bill, a percentage of Social Security benefits would be subtracted from the taxpayer’s federal adjusted gross income for West Virginia Personal Income Tax purposes. It does not limit the amount to be subtracted to taxable Social Security benefits; non-taxable Social Security benefits are not included in federal adjusted gross income. The amount to be subtracted is based on overall gross income. If only taxable Social Security benefits were included in the proposed State tax exclusion, General Revenue Fund collections would be reduced by roughly $37.0 million in FY2017. The value of this proposed tax exclusion will escalate over time as members of the baby-boom generation begin receiving Social Security benefits.
    
    Additional administrative costs incurred by the State Tax Department would be $25,500 in FY2016 and $10,000 in subsequent fiscal years.



Memorandum


    The stated purpose of this bill is to exempt a percentage of social security benefits from personal income tax based on individual’s overall amount of taxable income.
    
    The proposed bill states that “a percentage of social security benefits” will be subtracted from the individual’s federal adjusted gross income. It does not limit it to taxable social security benefits. Non-taxable social security benefits are not included in federal adjusted gross income. However, under the paragraphs addressing the percentages that may be reduced based upon income ranges, the proposed bill does state that a percentage of that individual’s social security benefits will “be subtracted from federal adjusted gross income to the extent included therein.” Under those paragraphs, the proposed bill appears to be limiting the social security benefits eligible for the modification to taxable social security benefits or, in other words, the benefits which were included in federal adjusted gross income. However, the proposed bill could be reworded to make it clearer that the bill is talking about social security benefits that are included in federal adjusted gross income.
    
    The language in the proposed bill is phrased in a manner such that individuals who happen to earn exactly $50,000, $70,000, $80,000, or $90,000 would be included in two percentage groups.
    
    The bill, as written, provides that the modification for Social Security benefits must be included in the calculations in determining the $8,000 modification for surviving spouses.
    
    The proposed bill has an effective date of taxable years beginning after December 31, 2015. The title of the proposed bill does not mention the internal effective date.
    



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