SB 0472 - Fiscal Note

Fiscal Note - SB 0472 - Authorizes income tax deduction for certain secondary school expenses

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO. 2408-02

BILL NO. SCS for SB 472 and 601

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

TYPE: Original

DATE: January 30, 1998

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 1999	FY 2000	FY 2001
General Revenue	$0	($7,769,655)	($7,769,655)
Total Estimated Net Effect on All State Funds	$0	($7,769,655)	($7,769,655)

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 3 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials of the Department of Revenue (DOR) state this proposal adds a deduction from income for tuition, fees and other costs up to a total of $2,500 for dependents in grades 9 through 12.

The Division of Taxation states their are 108,000 students that pay tuition in schools in Missouri. Of the 108,000 students DOR is uncertain how many fall within one family or how many are in grades nine through twelve which are qualifications for the deduction. DOR assumes that at least 50,000 taxpayers will claim this deduction and therefore request 4 Tax Collection Technician I positions to address this additional workload. The Division of Taxation would also request one Data Entry Operator II for a 4 month period to address this task.

Oversight assumes that the tax deduction would be a modification to the Missouri Income Tax Return and that DOR could handle this proposal with their current resources.

Officials of the Department of Elementary and Secondary Education (DES) state this proposal would not fiscally impact their agency or school districts.

Officials of the Office of Administration (COA) state this proposal would allow an individual a $2,500 deduction for paying the tuition or school expenses for a secondary school student.

COA staff state there are 26,258 students in private secondary schools in Missouri. The average tuition for private secondary schools is $4,578 as stated in table 271 of the 1997 Statistical Abstract. Therefore, it is assumed that all of these students would take the full $2,500 deduction. There are 255,397 students in public secondary schools in Missouri. It is assumed that these students have school and transportation expenses of $250 annually. A 6% marginal tax rate was assumed. COA staff assume that taxpayers would not adjust their withholdings in FY99 to take advantage of this new deduction.

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
Educational Expense Income
Tax Deduction	$0	($7,769,655)	($7,769,655)
ESTIMATED NET EFFECT TO
GENERAL REVENUE FUND	$0	($7,769,655)	($7,769,655)
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 act authorizes a state income tax deduction for school tuition, attendance fees,

supplies, and transportation costs up to a maximum of $2,500 for each dependent. It applies to all taxable years beginning on or after January 1, 1999.

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

Department of Elementary and Secondary Education

Jeanne Jarrett, CPA

Director

January 30, 1998