SB 0873 - Fiscal Note

Fiscal Note - SB 0873 - Phases in full deductibility of federal income taxes for individual and corporate taxpayers

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 3740-01

BILL NO. SB 873

SUBJECT: Corporations; Revenue Department; Taxation and Revenue - General; Taxation and Revenue - Income

TYPE: Original

DATE: February 20, 1998

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
General Revenue	$0	($108,169,538)	($188,443,724)
Total Estimated Net Effect on All State Funds	$0	($108,169,538)	($188,443,724)

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
None
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 3 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials from the Office of Administration (COA) state the individual income tax portion of this proposal is $0 in FY1999, ($95,247,848) in FY2000, and ($162,858,778) in FY2001. COA states these estimates are from the FY1999 Consensus Revenue Forecast and Budget and Planning's Individual Income Tax Simulator. COA further states the corporate income tax portion of this proposal is $0 in FY1999, ($12,921,690) in FY2000, and ($25,584,946) in FY2001. COA states these estimates are from the FY1999 Consensus Revenue Forecast and Budget and Planning's Corporate Income Tax Simulator. COA states the revenue reductions from this proposal would require an equivalent amount of general revenue in order to fully fund the Foundation Formula. COA assumes that taxpayers would not adjust their withholdings in FY1999 to take advantage of this deduction.

Department of Revenue officials assume this proposal would not fiscally impact their agency.

This proposal would reduce Total State Revenues.

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
GENERAL REVENUE FUND
Loss to General Revenue Fund
Increase in deductibility of
individual and corporate tax liabilities	$0	($108,169,538)	($188,443,724)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND	$0	($108,169,538)	($188,443,724)
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
	$0	$0	$0

FISCAL IMPACT - Small Business

Small businesses with income tax liability would be affected by this proposal.

DESCRIPTION

This proposal would phase in the full deductibility of federal income taxes paid for individual and corporate taxpayers as follows: for individuals (current deduction is $5,000 for singles and $10,000 for combined return filers) the deduction would be increased in 1999 to $10,000/singles, $20,000/combined; for 2000 the deduction would be $20,000/singles, $40,000 combined; and for tax years beginning on or after January 1, 2001, the full deduction would be allowed. For corporate taxpayers (the current deduction is limited to 50% of federal income taxes paid), the deduction would be increased in filing year 1999 to 67%; in filing year 2000 to 83%; and in

filing years 2001 and thereafter the full deduction would be allowed.

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

Jeanne Jarrett, CPA

Director

February 20, 1998