SB 0932 - Fiscal Note

Fiscal Note - SB 0932 - Increases dependency exemption deduction from $400 to $800

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 3827-01

BILL NO. SB 932

SUBJECT: Tax and Revenue-Income: Children and Minors

TYPE: Original

DATE: March 2, 1998

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
General Revenue	($13,642,664)	($32,807,878)	($32,873,494)
Total Estimated Net Effect on All State Funds	($13,642,664)	($32,807,878)	($32,873,494)

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 of the Department of Revenue (DOR) state this proposal raises the income tax dependency deduction from $400 to $800. DOR staff state this proposal would not fiscally impact to their agency.

Officials of the Office of Administration (COA) state this proposal increases the dependency deduction to $800 after January 1, 1999.

COA staff have assumed that this proposal would have an estimated impact of approximately $0 in FY99, ($32,807,878) in FY2000 and ($32,873,494) in FY2001. COA staff assume that taxpayers would not adjust their withholdings in FY99 to take advantage of the increased dependent deduction. The estimate is based on State of Missouri Individual Income Tax data, data from the Tax Expenditure Report, and population projections from the State Demographer.

Oversight estimates a loss to General Revenue of $13,642,664 for FY99 due to the possibility of reduced withholding and estimated income tax payments for salaries and wages received after January 1, 1999. Oversight assumes the Department of Revenue would be required to adjust withholding tables, and has reflected five months of calendar year 1999 as the revenue loss for FY99. Oversight has reflected the revenue loss for this proposal assuming 100% of taxpayers would adjust payments, however, it should be noted that this amount could be less, depending on taxpayers' awareness of the increase in the dependency deduction and their desire to adjust tax withholdings or estimated payments.

Oversight has not estimated or included a potential loss to the General Revenue Fund for the effects of taxpayers' corresponding increase in federal income taxes which in turn would result in a slight reduction to income taxes paid to the State of Missouri. Factors which would influence this amount include the ability of the taxpayer to itemize deductions, the income level of the taxpayer and the limitation of the federal income tax deduction on the Missouri return.

This proposal would result in a decrease in Total State Revenues.

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(6 Mo.)
GENERAL REVENUE FUND
Loss to General Revenue Fund
Increased Dependency Deduction	($13,642,664)	($32,807,878)	($32,873,494)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND	($13,642,664)	($32,807,878)	($32,873,494)
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(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 law, individual income taxpayers may deduct $400 on the state income tax return for each dependent that they are allowed to claim on the federal income tax return. This bill increases the deduction to $800 for tax years beginning on or after January 1, 1999.

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

Jeanne Jarrett, CPA

Director

March 2, 1998