SB 0318 - Fiscal Note

Fiscal Note - SB 0318 - Increases state income tax personal exemptions by $900

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 1276-03

BILL NO.: SCS for SB 318

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

TYPE: Original

DATE: February 4, 1999

---

FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
General Revenue	($38,850,000)	($157,600,000)	($159,800,000)
Total Estimated Net Effect on All State Funds	($38,850,000)	($157,600,000)	($159,800,000)

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	$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 (DOR) state this proposal would increase the personal exemption amount to $2,100 for a taxpayer beginning January 1, 1999.

ADMINISTRATIVE IMPACT:

DOR states this proposal would require modifications to the income tax system. The Division of Taxation and Collections estimates these modifications, including programming changes, would require 519 hours of overtime at a cost of $15,606. Modifications to the income tax return and schedules would be completed with existing resources. State Data Center charges would increase due to the additional storage and fields to be captured. Funding in the amount of $3,378 would be requested.

Oversight assumes no additional costs for modifications and/or charges for the income tax system. These additional costs would be requested through normal budgetary procedures.

Officials from the Office of Administration (COA) - Division of Budget and Planning (B&P)

assumes that based on data from the 1998 Tax Expenditure Report, DOR, and B&P's Individual Income Tax Simulator it was determined that increasing the personal exemption by $900 and the Head of Household personal exemption by $600 would yield a revenue reduction in FY 2000 of $155.4 million.

Oversight estimates a loss to the General Revenue Fund of $38,850,000 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 taxpayer's awareness of the deductibility of Social Security benefits in determining state income tax and their desire to adjust withholdings or estimated payments.

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 personal exemption	($38,850,000)	($157,600,000)	($159,800,000)
FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
(continued)	(6 Mo.)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND	($38,850,000)	($157,600,000)	($159,800,000)
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 state income tax personal exemption amounts, for all taxable years beginning on or after January 1, 1999, as follows: for singles, the personal exemption would be increased from the current $1,200 to $2,100, and for married taxpayers filing a combined return, the amount would be increased from $2,400 to $4,200. This increase would result in a corresponding increase for married taxpayers filing separate returns from the current $1,200 to $2,100 and for a head of household and for a qualifying widow or widower with a dependent child from the current $2,000 to $2,900.

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 4, 1999