This Fiscal Note is not an official copy and should not be quoted or cited.
Fiscal Note - SB 0546 - Private Retirement Benefits Exempt From State Income Tax
L.R. NO. 1814-01
BILL NO. SB 546
SUBJECT: RETIREMENT; INCOME TAX; TAXATION
TYPE: Original
DATE: January 3, 1996
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
General Revenue ($24,000,000) ($60,020,135) ($60,023,093)
Total Estimated
Net Effect on All
State Funds ($24,000,000) ($60,020,135) ($60,023,093)
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
None
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1997 FY 1998 FY 1999
Local Government $0 $0 $0
FISCAL ANALYSIS
ASSUMPTION
In a similar proposal officials of the Office of Administration assumed that
exempting private pensions from state income tax would have an estimated
fiscal impact of approximately $60 million annually. Their estimates were
based on data received from the State of Missouri Individual Income Tax and
Federal Tax data obtained from the IRS indicating the amount of pensions and
number of returns filed. In calculating their estimates OA staff assumed a
marginal tax rate of 6% and that the amount and number of pensions would not
increase.
For purposes of this fiscal note Oversight has made the same assumptions as
the Office of Administration.
Officials of the Department of Revenue assume that exempting private pensions
from state income tax would affect approximately 200,000 taxpayers that
receive a private retirement benefit. The Division of Taxation would request
3.5 Tax Audit Analyst I's to handle the additional pre-edit, exception
processing, telephone calls, error correction and correspondence that would
be created from this legislation.
Oversight assumes for purposes of this fiscal note that the Division of
Taxation could handle the volume of work created by this proposal with .5 Tax
Audit Analyst I to handle the additional pre-edit and exception processing
and .5 Tax Audit Analyst I to handle the error correction and correspondence
generated.
Based on these assumptions, a loss to General Revenue of approximately $24
million for FY 1997 will be shown due to the possibility of reduced
withholding and estimated income tax payments for the first six months of
calendar year 1997.
Oversight has not estimated or included a potential loss to the General
Revenue Fund for the effects of taxpayers' corresponding increase in federal
income taxes which in turn would result in a slight reduction to income taxes
paid to the State of Missouri. Factors which would influence this amount
include the ability of the taxpayer to itemize deductions, the income level
of the taxpayer and the limitation of the federal income tax deduction on the
Missouri return.
FISCAL IMPACT - State Government FY 1997 FY 1998 FY 1999
(10 Mo.)
Cost to General Revenue Fund
Department of Revenue (DOR)
Personal Service (1 FTE) $0 ($8,284) ($16,982)
Fringe Benefits $0 ($2,547) ($5,220)
Expense and Equipment $0 ($9,304) ($891)
Administrative Cost to DOR $0 ($20,135) ($23,093)
Loss to General Revenue Fund
Retirement Benefits Exemption($24,000,000)($60,000,000)($60,000,000)
ESTIMATED NET EFFECT TO
GENERAL REVENUE FUND ($24,000,000)($60,020,135)($60,023,093)
FISCAL IMPACT - Local Government FY 1997 FY 1998 FY 1999
(10 Mo.)
0 0 0
DESCRIPTION
This proposal would allow privately funded annuities, pensions or retirement
allowances the pension exemption authorized in section 143.124
This proposal would become effective on January 1, 1997.
This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements or rental
space.
SOURCES OF INFORMATION
Department of Revenue
NOT RESPONDING: Office of Administration