SB 0927 - Fiscal Note

Fiscal Note - SB 0927 - Reduces State Sales/Use Tax Rate By 1/8%; Elderly Dependent

L.R. NO.  3501-01
BILL NO.  SB 927
SUBJECT:  Taxation; Sales tax; Income tax; Elderly Dependent
TYPE:     Original
DATE:     February 27, 1996



                              FISCAL SUMMARY

                    ESTIMATED NET EFFECT ON STATE FUNDS

FUND AFFECTED                 FY 1997         FY 1998        FY 1999

General Revenue         ($54,738,727)   ($77,246,046)  ($80,536,000)

Highway                  ($3,700,000)    ($5,100,000)   ($5,400,000)

Total Estimated
Net Effect on All
State Funds             ($58,438,727    ($82,346,046)  ($85,936,000)


                   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          ($925,000)     ($1,275,000)   ($1,350,000)


                              FISCAL ANALYSIS

ASSUMPTION

Officials of the Department of Revenue state this proposal would reduce the
state sales and use tax from 4% to 3 7/8%  effective August 28, 1996, and
allows an additional $1600 dependent deduction for dependents that are 65
years of age and are not residing in a facility qualified to receive federal
or state funding.

Department of Revenue staff state because the effective date is August 28,
1996, for the sales/use tax rate reduction, forms would need to be revised
and remailed for those accounts currently using single location vouchers. The
additional vouchers would be required so the businesses may report sales
taxes collected or use taxes due at two different rates for a single filing
period (prior to August 28, 1996, and after that date). The Forms cost would
be approximately $19,712. Also, additional data entry duties to enter
information for the additional location would require approximately $15,000
in overtime moneys. The Department would also request $51,015 in notification
costs to retailers.

The Information Systems Division would be responsible for the additional line
on the income tax adjustment form and all programming related to this
adjustment. Existing personnel would perform the programming changes; however
State Data Center costs would be requested.

Oversight assumes the overtime request by the Department of Revenue would be
absorbed. Oversight has allowed the requests for notification costs, forms
and State Data Center costs.

Officials of the Office of Administration (OA) based their estimates for this
proposal on 1993 Missouri Individual Income Tax data, 1990 Census of
Population (Household and Family Characteristics for Individuals over 65) and
IRS Regulation 1.152-1. OA staff report that approximately 41,000 individuals
qualify to take the income tax deduction. OA calculated their estimates by
taking 41,000 times $1600 and using the maximum state income tax rate of 6%
to reflect a loss to General Revenue of up to $3.9 million annually.

OA staff estimate for the sales tax reduction assumes the rate cut is
effective 9/1/96 and there would be a one month lag in the revenue impact
with a 4.5% growth rate.

Oversight estimates a loss to General Revenue of $1,968,000 for FY 1997 due
to the possibility of reduced withholding and estimated income tax payments
for the first six months of calendar year 1997.


FISCAL IMPACT - State Government     FY 1997       FY 1998       FY 1999
                                    (10 Mo.)
GENERAL REVENUE FUND

Cost-Department of Revenue
   Expense and Equipment           ($70,727)     ($10,046)            $0

Loss to General Revenue Fund
   Increased Dependency Exemption
   Income Tax Deduction         ($1,968,000)  ($3,936,000)  ($3,936,000)

   Decrease in collections due to
   reduced sales tax rate      ($52,700,000) ($73,300,000) ($76,600,000)

ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND           ($54,738,727) ($77,246,046) ($80,536,000)

HIGHWAY FUND

Loss-Highway Fund
   Decrease in collections due to
   reduced sales tax rate       ($3,700,000)  ($5,100,000)  ($5,400,000)

ESTIMATED NET EFFECT ON
HIGHWAY FUND                    ($3,700,000)  ($5,100,000)  ($5,400,000)

FISCAL IMPACT  - Local Government    FY 1997       FY 1998       FY 1999
                                    (10 Mo.)
Loss - Local Governments
   Decrease in distributions from
   state highway fund.            ($925,000)  ($1,275,000)  ($1,350,000)

ESTIMATED NET EFFECT TO
LOCAL GOVERNMENTS                 ($925,000)  ($1,275,000)  ($1,350,000)


DESCRIPTION

This act grants an additional $1,600 dependency exemption ($2,000 total) for
dependents age 65 or over who do not reside in a facility qualified to
receive federal or state funding. This act also lowers the state sales and
use tax rate by 1/8% (4.225% to 4.1%) effective August 28, 1996.

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

Office of Administration
Department of Revenue