SB 0161 - Fiscal Note

Fiscal Note - SB 0161 - Authorizes state income tax credit equal to 20% of federal earned income credit

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 0647-01

BILL NO.: SB 161

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

TYPE: Original

DATE: February 8, 1999

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
General Revenue	$0	($112,900,000 to $132,900,000)	($117,500,000 to $138,200,000)
Total Estimated Net Effect on All State Funds	$0	($112,900,000 to $132,900,000)	($117,500,000 to $138,200,000)

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 of the Office of Administration (COA) assume that taxpayers would not adjust their withholdings in FY 2000 to take advantage of this credit. COA estimate is based on the amount of earned income tax credit claimed in Missouri in 1996 from the Spring 1998 Statistics of Income. COA assumes an annual growth rate of four percent based on U. S. Treasury forecasts. The lower limit is based on the assumption that only 85% of taxpayers who use the federal credit will use the state credit. The upper limit assumes 100% of taxpayers who use the federal credit will use the state credit.

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
Earned income tax credit	$0	($112,900,000	($117,500,000
		to	to
		$132,900,000)	$138,200,000)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND	$0	($112,900,000	($117,500,000
		to	to
		$132,900,000)	$138,200,000)
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 authorize, for all taxable years beginning on or after January 1, 1999, a state income tax credit equal to twenty percent of the amount which a taxpayer claims as a federal earned income tax credit. The credit would be refundable to the extent that the credit exceeds the amount of tax due. The Department of Revenue would be required to notify potential claimants of their eligibility.

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 8, 1999