Fiscal Note - SB 0081 - Excess Social Security to be Excluded From Missouri Income Tax
L.R. NO. 0315-01
BILL NO. SB 81
SUBJECT: Income tax: Retirement Systems and Benefits
TYPE: Original
DATE: January 6, 1997
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
General Revenue $0 ($49,586,547) ($51,064,624)
Total Estimated
Net Effect on All
State Funds $0 ($49,586,547) ($51,064,624)
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 this proposal would allow
a taxpayer to subtract from Federal Adjusted Gross Income any social security
benefits that are included in the Federal gross income. DOR staff state that
there are approximately 180,000 to 200,000 Missouri income tax returns that
have taxable social security benefits in their Missouri adjusted gross
income. The Information System Division's operating bureau would request one
Data Entry Operator II for four months of each tax year to key enter the
additional deduction from the income tax return. State Data Center costs
would be requested for testing and additional storage.
The Division of Taxation does not anticipate a significant number of errors
or processing requirements from this proposal and therefore would use
existing staff resources. However, if the processing errors from this
proposal would exceed 25,000 accounts a request for a FTE and
equipment/expenses would be requested through the budget process.
Oversight for purposes of this fiscal note has allow the State Data Center
costs.
Officials of the Office of Administration (COA) state there are no statistics
available on how much Social Security Benefits are in Missouri Adjusted Gross
Income, therefore national data was used. The IRS in its Fall 1996 Statistics
of Income reports that in 1994 there was $38,639,292,000 in Social Security
Benefits in federal adjusted gross income. In FY 96 Missouri personal income
was 1.9% of national personal income as reported in the November 1996 Survey
of Current Business. COA staff assume the amount of Social Security Benefits
in Missouri Adjusted Gross Income is 1.9% of the national total or
$734,146,548. A 6% marginal tax rate was used to determine the amount of
individual income tax revenue loss to the state. A 3% growth rate was assumed
to reflect inflation. COA staff assume that taxpayers will not adjust their
withholdings in FY 98 to take advantage of this proposal.
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
Social Security Benefits Deduction $0 ($49,577,304) ($51,064,624)
ESTIMATED NET EFFECT TO
GENERAL REVENUE FUND $0 ($49,586,547) ($51,064,624)
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
Under current federal law, a taxpayer's social security benefits are exempt
from taxation unless the taxpayer's modified adjusted gross income plus
one-half of the social security benefits exceed a base amount. Under the
current rules, the maximum amount includible in gross income is 85% of the
social security benefits received in the tax year. This act authorizes the
subtraction from a taxpayer's federal adjusted gross income any amounts which
are included in a taxpayer's federal gross income as a result of the above
mentioned federal law in arriving at the taxpayer's Missouri adjusted gross
income. This act shall become effective January 1, 1998 and shall apply to
all taxable years beginning after December 31, 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
Office of Administration
This Fiscal Note is not an official copy and should not be quoted or cited.