Fiscal Note - SB 0041 - Private Pension Tax Exemption
L.R. NO. 0079-03
BILL NO. SB 41
SUBJECT: Retirement Systems and Benefits-General; Taxation and
Revenue-Income
TYPE: Original
DATE: December 27, 1996
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
General Revenue ($26,414,728) ($70,629,961) ($70,815,180)
Total Estimated
Net Effect on All
State Funds ($26,414,728) ($70,629,961) ($70,815,180)
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
None
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Local Government $0 $0 $0
FISCAL ANALYSIS
ASSUMPTION
Officials of the Department of Revenue (DOR) assume that exempting private
pensions from state income tax would affect approximately 200,000 taxpayers
that receive a private retirement benefit. The Division of Taxation would
request 3.5 Tax Processing Technician I's to handle the additional pre-edit,
exception processing, telephone calls, error correction and correspondence
that would be created from this legislation.
Oversight assumes for purposes of this fiscal note that the Division of
Taxation could handle the volume of work created by this proposal with .5 Tax
Processing Technician I to handle the additional pre-edit and exception
processing and .5 Tax Processing Technician I to handle the error correction
and correspondence generated.
Officials of the Office of Administration (COA) assume that this proposal
would have an estimated fiscal impact of $0 in FY 1998, ($70,615,373) in FY
1999 and ($70,791,912) in FY 2000. The estimates are based on State of
Missouri Individual Income Tax and Federal Income Tax data indicating the
amount of pensions and number of returns filed. In calculating the estimate,
COA staff assume a marginal tax rate of 6% and that the number of pensions
increases at the same rate Missouri's over 65 population increases.
Population figures are from the State Demographer. Withholding are assumed
not to be adjusted until the proposal is fully phased in.
Oversight estimates a loss to General Revenue of $26,414,728 for FY 1998 due
to the possibility of reduced withholding and estimated income tax payments
for five months of calendar year 1998.
Oversight has not estimated or included a potential loss to the General
Revenue Fund for the effects of taxpayers' corresponding increase in federal
income taxes which in turn would result in a slight reduction to income taxes
paid to the State of Missouri. Factors which would influence this amount
include the ability of the taxpayer to itemize deductions, the income level
of the taxpayer and the limitation of the federal income tax deduction on the
Missouri return.
This proposal would result in a decrease in Total State Revenues since the
Individual Income tax collections are included in the calculation of Total
State Revenue.
FISCAL IMPACT - State Government FY 1998 FY 1999 FY 2000
(6 Mo.)
Cost to General Revenue Fund
Department of Revenue (DOR)
Personal Service (1 FTE) $0 ($8,661) ($17,756)
Fringe Benefits $0 ($2,471) ($5,066)
Expense and Equipment $0 ($3,456) ($446)
Administrative Cost to DOR $0 ($14,588) ($23,268)
Loss to General Revenue Fund
Retirement Benefits Exemption ($26,414,728) ($70,615,373) ($70,791,912)
ESTIMATED NET EFFECT TO
GENERAL REVENUE FUND ($26,414,728) ($70,629,961) ($70,815,180)
FISCAL IMPACT - Local Government FY 1998 FY 1999 FY 2000
(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 allow privately funded annuities, pensions or retirement
allowances the pension exemption authorized in section 143.124
This proposal would become effective on January 1, 1998.
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
This Fiscal Note is not an official copy and should not be quoted or cited.