Fiscal Note - SB 0068 - Capital Gains Excluded From Missouri Income Tax
L.R. NO. 0264-01
BILL NO. SB 68
SUBJECT: Taxation and Revenue: Income tax
TYPE: Original
DATE: January 27, 1997
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
General Revenue ($13,380,561) ($147,149,433) ($151,554,395)
Total Estimated
Net Effect on All
State Funds ($13,380,561) ($147,149,433) ($151,554,395)
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
None
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Local Government $0 $0 $0
FISCAL ANALYSIS
ASSUMPTION
Officials of the Department of Revenue (DOR) state the 1994 Federal income
tax statistics show there were 309,000 returns that had a net capital gain.
This proposal would require modifications to the individual income tax
system. Modifications would require restructure of data base records,
programs/online screens, and most major functions of the system. These
modifications would be completed by existing staff, State Data Center costs
would be requested for testing and additional storage. The Department of
Revenue would request one Data Entry Operator II for four months of each tax
year to key enter the additional data.
Oversight for purposes of this fiscal note has allowed the State Data Center
costs.
Officials of the Office of Administration (COA) state this proposal would
eliminate Missouri individual income tax on capital gains. COA staff state
that this proposal would have an estimated impact of approximately ($0) in
FY98, ($147,140,190) in FY99 and ($151,554,395) in FY2000. COA staff assume
that taxpayers will not adjust their withholdings in FY98 to take advantage
of the elimination of income tax on capital gains. The estimate is based on
the IRS's calculation of capital gains claimed by Missourians in 1994 as
reported in the Spring 1996 edition of Statistics of Income. In calculating
the estimate, COA staff assume a marginal tax rate of 6% and a inflation rate
of 3%.
Oversight estimates a loss to General Revenue of $13,380,561 for FY 1998 due
to the possibility of reduced withholding and estimated income tax payments
for five months of calendar year 1998. Oversight assumes 25% of Missouri
taxpayers would adjust payments, however, it should be noted that this amount
could be less, depending on taxpayers' awareness of the elimination of income
tax on capital gains and their desire to adjust tax withholdings or estimated
payments.
Oversight is unable to determine the amount of revenue loss associated with
the current portion of the capital gain which is authorized to be subtracted
from the taxpayer's federal adjusted gross income when calculating the
Missouri adjusted gross income. The COA staff estimate reflects the
elimination of income tax on all capital gains, which includes the current
portion of capital gains already authorized. Oversight assumes this amount
would be minimal.
This proposal would result in a decrease in Total State Revenues since the
Individual Income tax collections are included in the calculation of Total
State Revenue.
FISCAL IMPACT - State Government FY 1998 FY 1999 FY 2000
(6 Mo.)
GENERAL REVENUE FUND
Cost to General Revenue Fund
Department of Revenue (DOR)
Expense-State Data Center Costs $0 ($9,243) $0
Loss to General Revenue Fund
Elimination of Income tax
on Capital Gains ($13,380,561) ($147,140,190) ($151,554,395)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUNDS ($13,380,561) ($147,149,433) ($151,554,395)
FISCAL IMPACT - Local Government FY 1998 FY 1999 FY 2000
(6 Mo.)
0 0 0
FISCAL IMPACT - Small Business
No direct fiscal impact to small businesses would be expected as a result of
this proposal.
DESCRIPTION
This proposal authorizes a taxpayer to subtract any capital gains from the
taxpayer's federal adjusted gross income when calculating the taxpayer's
Missouri adjusted gross income. Currently, only a portion of the capital gain
that results from the sale of a low-income project which has at least 40% of
the units occupied by persons having an income of 60% or less of the median
income is authorized to be subtracted from the taxpayer's federal adjusted
gross income when calculating the taxpayer's Missouri adjusted gross income.
This act would expand the types of capital gain which are permitted to be
subtracted from federal adjusted gross income when calculating a taxpayer's
Missouri adjusted gross income.
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
Office of Administration
This Fiscal Note is not an official copy and should not be quoted or cited.