SB 0063 - Fiscal Note

Fiscal Note - SB 0063 - Restores full federal income tax deductibility for individuals

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 0276-01

BILL NO.: SB 63

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

TYPE: Original

DATE: February 12, 1999

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
General Revenue	$0	$0	$0
Outstanding Schools Trust	$0	($323,500,000)	($343,800,000)
Total Estimated Net Effect on All State Funds	$0	($323,500,000)	($343,800,000)

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	(UNKNOWN)	(UNKNOWN)	(UNKNOWN)

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 4 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials from the Department of Revenue assume this proposal would not fiscally impact their agency. All modifications to the income tax system, forms, and reports would be completed by the Division of Taxation with existing staff and resources.

Office of Administration (COA) officials state the estimates are from the FY 2000 Consensus Revenue Forecast and COA's Individual 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 FY 2000 to take advantage of this deduction.

Oversight will reflect the impact of this proposal as a loss to the Outstanding Schools Trust Fund.

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

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
	(6 Mo.)
GENERAL REVENUE FUND
Loss - General Revenue Fund
Increase in federal income tax deduction	$0	($323,500,000)	($343,800,000)
Savings - General Revenue Fund
Reduction in funds transferred to
Outstanding Schools Trust Fund	$0	$323,500,000	$343,800,000
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND	$0	$0	$0
OUTSTANDING SCHOOLS TRUST FUND
Loss - Outstanding Schools Trust Fund
Reduction in funds transferred from
Outstanding Schools Trust Fund	$0	($323,500,000)	($343,800,000)
FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
(continued)	(6 Mo.)
ESTIMATED NET EFFECT ON
OUTSTANDING SCHOOLS
TRUST FUND	$0	($323,500,000)	($343,800,000)
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
	(6 Mo.)
LOCAL SCHOOL DISTRICTS
Loss - Local School Districts
Reduction in funds transferred from the
Outstanding Schools Trust Fund	(Unknown)	(Unknown)	(Unknown)
ESTIMATED NET EFFECT ON
LOCAL SCHOOL DISTRICTS	(UNKNOWN)	(UNKNOWN)	(UNKNOWN)
FISCAL IMPACT - Small Business
Small businesses would be expected to be fiscally impacted to the extent that they pay income taxes. The increase in the federal income tax deduction would cause small businesses to pay less state income tax.

DESCRIPTION

Current law limits the deduction for federal income taxes paid by individuals to $5,000 for single filers and $10,000 for married couples filing a combined return. This proposal would remove those limitations and would allow full deductibility of federal income taxes for individuals beginning January 1, 2000.

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

February 12, 1999