SB 0147 - Fiscal Note

Fiscal Note - SB 0147 - Phases out assessed valuation of motor vehicles used primarily for nonbusiness purposes

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 0449-02

BILL NO. SB 147

SUBJECT: Taxation and Revenue: Property Tax-Motor Vehicles

TYPE: Original

DATE: February 9, 1998

---

FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
General Revenue	$0	$0	($109,700,000)
Blind Pension	$0	$0	($565,000)
Total Estimated Net Effect on All State Funds*	$0	$0	($110,265,000)

*Represents maximum effect on state.

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
Political Subdivisions	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 5 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials of the State Tax Commission, the Department of Revenue, the Department of Transportation, and the Department of Elementary and Secondary Education (DES) stated that the proposal would not affect their agencies, administratively. Officials of the Office of Administration-Division of Budget and Planning stated they could accomplish duties required by this proposal with existing personnel.

Estimated possible revenue losses assume 93% of motor vehicles ($419 million in tax in 1997) are used for non-business purposes, an average local tax rate of $5.82, and tax collections increasing 3% per year. The Blind Pension Tax rate is $.03.

Oversight notes that the proposal is designed to have no fiscal impact on political subdivisions. Any monies subdivisions would realize from adjusting tax rates and from increased Foundation Formula distributions would be subtracted from total losses before direct state reimbursements would be calculated.

While school district taxes account for about 70% of property taxes in Missouri, it should be noted that not all districts would benefit from increased Formula distributions ("hold harmless districts would not receive additional monies) and that there is no obligation to fully fund the Formula.

Officials of the County Employees Retirement Fund note that penalties assessed on entities which return their personal property lists to County Assessors after the deadline (1 March of every year) and some penalties on delinquent personal property tax are deposited in the Fund. Phasing out the property tax on motor vehicles from property tax would eliminate a source of the Fund's income. They estimate a long-term increase in the Fund's shortfall of $45,500,000.

Reducing assessed values could affect amounts needed to fully fund the Foundation Formula. DES officials note that reducing assessed values would start to lower the guaranteed tax base in three years. A reduced guaranteed tax base reduces the inflation adjustment in the Formula for districts to fund inflationary increases of educational and operational increases. Increased costs to fully fund the Formula may "zero out" after the third year any reduction in assessed values would be in effect.

Oversight assumes a constitutional amendment would pass in the year 2000, assessments would be affected beginning January 1, 2001, and collections would be affected beginning in FY 2002 (property tax bills are usually sent in November).

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
GENERAL REVENUE FUND
Cost - Increased Foundation Formula
Funding and/or direct reimbursements
to Political Subdivisions	$0	$0	($109,700,000)
NET EFFECT ON GENERAL
REVENUE FUND	$0	$0	($109,700,000)
BLIND PENSION FUND
Loss - Reduced Tax Collections	$0	$0	($565,000)
NET EFFECT ON BLIND
PENSION FUND	$0	$0	($565,000)
FISCAL IMPACT - State Government	FY 2003	FY 2004	FY 2005
GENERAL REVENUE FUND
Cost - Increase Foundation Formula
Funding and/or direct reimbursements
to Political Subdivisions	($221,300,000)	($353,600,000)	($479,700,000)
NET EFFECT ON GENERAL
REVENUE FUND	($221,300,000)	($353,600,000)	($479,700,000)
BLIND PENSION FUND
Loss - Reduced Tax Collections	($1,190,000)	($1,820,000)	($2,470,000)
NET EFFECT ON BLIND
PENSION FUND	($1.190,000)	($1,820,000)	($2,470,000)
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
POLITICAL SUBDIVISIONS
Income - Reimbursements from State
and/or Increased Tax Rates	$0	$0	$109,700,000
Loss - Motor Vehicle Property Tax	$0	$0	($109,700,000)
NET EFFECT ON POLITICAL
SUBDIVISIONS	$0	$0	$0
FISCAL IMPACT - Local Government	FY 2003	FY 2004	FY 2005
POLITICAL SUBDIVISIONS
Income - Reimbursements from State
and/or Increased Tax Rates	$221,300,000	$353,600,000	$479,700,000
Loss - Motor Vehicle Property Tax	($221,300,000)	($353,600,000)	($479,700,000)
NET EFFECT ON POLITICAL
SUBDIVISIONS	$0	$0	$0
FISCAL IMPACT - Small Business
This proposal would affect small businesses. They could benefit from personal property tax provisions.

DESCRIPTION

The proposal would phase out the property tax on exempt all motor vehicles used for non-business purposes beginning January first of the year after a constitutional amendment allowing the legislature to exempt those motor vehicles from property taxes. The state would reimburse political subdivisions for monies lost due to the exemption.

This legislation is not federally mandated, would not duplicate any other program, would not

require additional capital improvements or rental space. It would affect Total State Revenue.

SOURCES OF INFORMATION

Department of Elementary and Secondary Education

Department of Transportation

Department of Revenue

Office of Administration

State Tax Commission

Jeanne Jarrett, CPA

Director

February 9, 1998