SB 0107 - Fiscal Note

Fiscal Note - SB 0107 - Increases income levels to qualify for income tax pension exemption

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 0264-01

BILL NO.: SB 107

SUBJECT: Elderly; Taxation and Revenue - General; Taxation and Revenue - Income

TYPE: Original

DATE: January 29, 1999

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
General Revenue	($3,375,000)	($13,500,000)	($16,200,000)
Total Estimated Net Effect on All State Funds	($3,375,000)	($13,500,000)	($16,200,000)

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
None
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 3 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials from the Department of Revenue assume this proposal would not fiscally impact their agency.

Office of Administration (COA) officials state that based on tax data from the IRS, the Missouri Department of Revenue, and COA - Division of Budget and Planning's individual tax simulator, it was determined that approximately 45,000 additional returns would qualify under the increased income limits. COA assumes a 6% marginal tax rate. COA assumes that taxpayers would not adjust their withholdings in FY 2000 to take advantage of this deduction. Therefore, COA estimates a revenue loss of $13,500,000 in FY 2001 and $16,200,000 in FY 2002.

Oversight estimates a loss to the General Revenue Fund of $3,375,000 for FY 2000 due to the possibility of reduced withholding and estimated income tax payments for five months of calendar year 2000. 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 increase in income levels for income tax pension exemption and their desire to adjust withholdings or estimated payments.

This proposal would result in a decrease in Total State Revenues due to the individual income tax collections being included in the calculation of Total State Revenue.

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
	(6 Mo.)
GENERAL REVENUE FUND
Loss - General Revenue Fund
Increase in pension exemption cap	($3,375,000)	($13,500,000)	($16,200,000)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND	($3,375,000)	($13,500,000)	($16,200,000)
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
	(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 would increase the income levels needed to qualify for the state income tax exemption for pensions as follows: for single taxpayers and heads of households, the limit would be increased from the current $25,000 to $32,000; for married couples filing a combined return, the limit would be increased from $32,000 to $40,000; and for married couples filing separate returns, the limit would be increased from $16,000 to $20,000.

The proposal has an effective date of January 1, 2000 and would apply to all taxable years beginning on or after that date.

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

Division of Budget and Planning

Jeanne Jarrett, CPA

Director

January 29, 1999