Fiscal Note - SB 0308 - Creates a Pharmaceutical Tax Credit In Senior Citizens; Property Tax Relief Law Known As the Circuit Breaker Law
L.R. NO. 1170-01
BILL NO. SB 308
SUBJECT: Elderly; Revenue Dept.; Taxation
TYPE: Original
DATE: February 17, 1997
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
General Revenue $0 ($21,204,576) to ($21,491,976) to
($41,549,101) ($41,833,501)
Total Estimated
Net Effect on All $0 ($21,204,576) to ($21,491,976) to
State Funds ($41,549,101) ($41,833,501)
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
PHARMACEUTICAL TAX CREDIT
Officials of the Department of Revenue (DOR) state this proposal would
require modifications to the individual income tax return. The form changes
and the additional key entry requirements would be completed by existing
staff. State Data Center costs would be requested.
The Division of Taxation would request one Tax Processing Technician I for
six months of each tax year to maintain the current time frame for processing
Property Tax Credits in the pre-edit and error correction areas.
Officials of the Office of Administration (OA) assume this portion of the
proposal would provide a refundable tax credit for the cost of prescription
drugs of up to $750 to people who qualify for the property tax circuit
breaker.
According to the Department of Revenue 64,389 returns (5,036 joint returns
and 59,353 single returns) qualified for the property tax circuit breaker in
1995. The Statistical Abstract of the United States shows that in 1994 the
average cost per consumer for Drugs and Medical Supplies (Includes
prescription and non-prescription drugs) was $586. If each single return who
qualifies for the property tax circuit breaker receives a refundable tax
credit of $586, and each joint return who qualifies for the property tax
circuit breaker receives a refundable tax credit of $1,172 (2 x the average
cost per consumer) the fiscal impact is ($40,683,050). No growth factor was
assumed.
Oversight has been unable to locate a source in order to estimate the effect
of medical insurance reimbursements for prescription drugs or the one percent
of adjusted gross income minimum which must be deducted from the credit.
However, Oversight assumes the amount would be less than OA's estimate based
on income limitations and the likelihood of Medicare coverage, so Oversight
has ranged the loss to General Revenue from 50% to 100% of OA's estimate,
($20,341,525 to $40,683,050 annually) for this portion of the proposal.
INCREASE IN ELIGIBILITY LEVELS
The maximum income level currently is $15,000. This proposal would increase
this maximum income level to $15,500 for calendar year 1997 and $500 every
year after that through the year 2002. Oversight used figures from the
Department of Revenue and a report generated by the College of Business and
Public Administration Research Center, University of Missouri for the 1994
tax year for Senior Citizen Refunds. For the income level of $14,000 to
$15,000, the total number of returns filed was 2,034. The average refund for
that income level was $140. This proposal also increases the minimum base
amount within the senior citizen property tax credit. Under current law this
minimum base level is $5,000. This proposal increases this base amount to
$5,900 and automatically increases it by $100 per calendar year until
calendar year 2002. Oversight has estimated that without this legislation
4,068 claims would be lost for fiscal year 1998, 6,102 claims for FY 1999 and
8,136 for FY 2000. Oversight was unable to estimate the impact of increasing
the minimum base but assumes it would be minimal. Oversight assumes because
the legislation would become effective for tax years beginning after Dec. 31,
1997 that costs would not be accrued until claims were filed in FY 99.
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
(10 Mo.)
Cost to General Revenue Fund
Department of Revenue (DOR)
Personal Service (.5 FTE) $0 ($8,661) ($8,878)
Fringe Benefits $0 ($2,471) ($2,533)
Expense and Equipment $0 ($639) $0
Administrative costs to (DOR) $0 ($11,771) ($11,411)
Loss to General Revenue Fund
Pharmaceutical Income Tax Credit ($20,341,525) ($20,341,525)
to to
$0 ($40,683,050) ($40,683,050)
Increase in circuit breaker
credit claims $0 ($854,280) ($1,139,040)
ESTIMATED NET EFFECT TO
GENERAL REVENUE FUND ($21,207,576) ($21,491,976)
to to
$0 ($41,549,101) ($41,833,501)
FISCAL IMPACT - Local Government FY 1998 FY 1999 FY 2000
(10 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 act authorizes a state income tax credit for pharmaceutical costs paid
by specified senior citizens and certain disabled veterans. The
pharmaceutical credit for each taxpayer is to be equal to the total amount
spent on purchasing covered prescription drugs in any calendar year less any
reimbursement from other sources and less 1% of income. The pharmaceutical
credit can not exceed $750 per tax year. The act increases the senior
citizen/disabled veteran property tax credit for state income tax purposes.
Under current law, only claimants with qualified incomes of $15,000 or less
are eligible for the tax credit. This act would increase the income maximums
to $15,500 for calendar year 1997, and automatically increases the maximum by
$500 per year until calendar year 2002. The bill also increases the minimum
base amount within the senior citizen/disabled veteran property tax credit.
The minimum base is the level of income at which all claimants who are at or
below this income level receive a tax credit equal to 100% of the amount of
property tax paid. As a claimant's income level exceeds this level, the
amount of property tax credit is reduced proportionately. Under current law,
this minimum base level is $5,000. The act increases this base amount to
$5,900 and automatically increases it by $100 per calendar year until
calendar year 2002. The bill will become effective January 1, 1998 and
applies to all tax 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.