SB 0483 - Fiscal Note

Fiscal Note - SB 0483 - Increases maximum upper limit and minimum base for property tax circuit breaker

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 2188-01

BILL NO. SB 483

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

TYPE: Original

DATE: December 17, 1997

---

FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
General Revenue	($10,417,075)	($10,921,002)	($11,521,527)
Total Estimated Net Effect on All State Funds	($10,417,075)	($10,921,002)	($11,521,527)

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
None
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 4 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials of the Department of Revenue (DOR) state this proposal would increase the property tax income base and lower the age requirement. By raising the income base and lowering the age requirement, additional taxpayers will be able to claim the credit. This change would require modifications to the property tax credit system. This would be completed by the Information Systems Division with existing resources. The Division of Taxation would request one Clerk I for six months to complete pre-edit functions and mail opening. One Tax Processing Technician I for six months would be needed to handle error correction and inquires. These employees are based on 1990 census data which indicates that there are 717,681 people 65 and older and 138,338 that are between the age of 62 and 64 living in Missouri. At the present time there are approximately 70,000 property tax credit claims being filed, which equals approximately eleven percent of age 65 and over individuals. If the eleven percent ratio is applied to the eligible universe then an estimated fifteen to twenty thousand additional credit claims could be generated.

Oversight received figures from the University of Missouri Research Center for the amount of total credits claimed. The University of Missouri Research Center estimated the total amount of projected circuit breaker tax credits with the age requirement at 65 to be $22,500,000 with the changes made by this proposal to the table. The difference of $6,100,000 in tax year 1998, $6,600,000 in tax year 1999 and $7,200,000 in tax year 2000, would be the loss to General Revenue for increasing the property tax income base.

DOR staff provided Oversight with the total number of senior citizens credit claims filed and refunds issued for tax years 1995, 1996 and 1997 to date. Based on those figures, Oversight has calculated the average senior citizens refund to be approximately $285. Using 15,000 as the amount of additional credit claims generated by lowering the age requirement to 62, Oversight has calculated the loss from this part of the proposal to be approximately $4,300,000 annually

($285 x 15,000 = $4.3 mil). Oversight estimates the combined loss to General Revenue for this proposal to be $10,400,000 for tax year 1998, $10,900,000 for tax year 1999 and $11,500,000 for tax year 2000. Oversight assumes this legislation would become effective for tax years beginning Jan. 1, 1998 and that costs would not be accrued until claims were filed in FY1999, FY2000 and FY2001.

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

FISCAL IMPACT - State Government	FY 1999	FY 2000	FY 2001
	(10 Mo.)
Loss to General Revenue Fund
Increase in circuit breaker
credit claims	($10,400,000)	($10,900,000)	($11,500,000)
Cost to General Revenue Fund
Department of Revenue (DOR)
Personal Service (1 FTE)	($13,340)	($16,408)	($16,818)
Fringe Benefits	($3,735)	($4,594)	($4,709)
Expense and Equipment	0	0	0
Administrative Cost to DOR	($17,075)	($21,002)	($21,527)
ESTIMATED NET EFFECT TO
GENERAL REVENUE FUND	($10,417,075)	($10,921,002)	($11,521,527)
FISCAL IMPACT - Local Government	FY 1999	FY 2000	FY 2001
	(10 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 broadens the extent of property tax relief under the circuit breaker law by increasing the "maximum upper limit" amount for eligibility from the current level of $15,000 to $17,000 for calendar years 1998 and beyond. This proposal increases the "minimum base" amount within the senior citizen/disabled veteran property tax credit. The minimum base is the level of income at which all claimants who are at or below this income level receive a tax credit equal to 100% of the amount of property tax paid. Under current law, this minimum base level is $5,900. This proposal increases this base amount to $7,000 for calendar years 1998 and beyond. This proposal changes how the table calculates the percent of income. Currently the percentage is 1/8 percent accumulative per $200 from 0 percent to 2 percent and 1/4 percent accumulative per $200 from 2 percent to 4 percent. This proposal would change this calculation to 1/8 percent accumulative per $200 from 0 percent to 4 percent. This proposal reduces the age limit from 65 to 62.

DESCRIPTION

(Continued)

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

University of Missouri Research Center

Jeanne Jarrett, CPA

Director

December 17, 1997