COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. NO. 3158-11
BILL NO. Truly Agreed to and Finally Passed CCS for HS #2 for HCS for SS for SCS for SB 675, 483, 490 and 564
SUBJECT: Children and Minors; Elderly; Taxation and Revenue-General-Income
TYPE: Original
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS Net Effect on All State Funds
FUND AFFECTED
FY 1999
FY 2000
FY 2001 General Revenue
($88,887,254) to
($102,725,744)
($89,380,803) to
($103,496,167)
($89,883,122) to
($104,280,897)
Total Estimated
($88,887,254) to
($102,725,744)
($89,380,803) to
($103,496,167)
($89,883,122) to
($104,280,897)
|
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 6 pages.
FISCAL ANALYSIS
ASSUMPTION
SECTION 135.030-Circuit Breaker
Circuit Breaker Portion of Proposal
Raises the maximum upper limit to $25,000 and the minimum base to $13,000.
Methodology
Currently 71,000 households take advantage of the Circuit Breaker Tax Credit. Their average credit is $294. Office of Administration (COA) staff estimate that the average credit for these taxpayers will increase by $250. This yields a revenue reduction of $17.8 million. Based on demographic data, they estimate that an additional 22,000 newly eligible households will claim the Circuit Breaker Tax Credit due to the increased upper income limit. They estimate that the average credit for this group would be $100. This yields a revenue reduction of $2.2 million. Including widows ages 60-64 on surviving spouse social security adds approximately 2,000 additional people, with an average credit of $440. This increases the cost of the Circuit Breaker Program by $900,000. The total cost of expanding the Circuit Breaker program in FY99 is $20.9 million. Two percent annual growth is assumed.
Officials of the Department of Revenue (DOR) state this legislation increases the maximum upper limit to $25,000 and the minimum base to $13,000. This legislation also requires the DOR to review the income tax returns filed to determine which taxpayers may qualify for the property tax credit and have not applied for the credit. Once this determination is made, DOR will notify these taxpayers, explaining his/her potential eligibility.
ADMINISTRATIVE IMPACT:
DIVISION OF TAXATION
Raising the maximum upper limit to $25,000 would make 125,000 additional taxpayers eligible to file for a property tax credit. Assuming 22% of the taxpayers participate, there would be an additional 27,500 property tax credit returns filed each year. In order to process these additional returns, pre-edit them and work the related errors involved, the Division of Taxation would need one Clerk I and one Tax Processing Technician I for 6 months.
In order to identify potential eligible taxpayers for the property tax credit, the Division of Taxation will have to add two boxes to the income tax return so the taxpayer can identify if he/she is over the age of 65 or 100% disabled. The Department indicates that it will be able to add this information to the income tax returns with existing staff and resources. The telefile system would also have to be modified, adding an additional minute to the 800 number usage for each taxpayer telefiling. MCI charges $250 for a script change and $.21 for each additional minute used when telefiling. The additional cost for the telefile usage is $10,541 ($.21 x 50,197, the number of taxpayers that telefiled last year).
With the increase in the maximum upper limit, there would be 447,000 people 65 or over who are eligible to file a property tax credit return. With the increase in the maximum upper limit, it is estimated that a total of 98,000 people will file for the property tax credit. Therefore, 349,000 people who are eligible to file a return will not do so. If these individuals file an income tax return with the Department, DOR will have to notify them of their potential eligibility.
The cost to print a Property Tax Credit booklet is $.10 per booklet, with a total cost of $34,900 (349,000 multiplied by $.10). The cost to print a letter for each taxpayer is $.04 per letter, with a total cost of $13,960 (349,000 multiplied by $.04).
DIVISION OF ADMINISTRATION
The Division of Administration estimated an additional cost of $111,680 in postage to notify the taxpayers potentially eligible for the property tax credit (349,000 multiplied by $.32).
INFORMATION SYSTEMS DIVISION
The Information Systems Division has determined that the cost to the State Data Center would be $12,733. This includes $8,454 for implementation costs and ongoing costs of $4,279. All other programming changes to the income tax system would be completed with existing staff and resources.
Based on information from COA on another proposal approximately 165,000 residents 65 and over have income of less than $15,000, yet only 71,000 actually claim the credit. This leaves 94,000 households that may be eligible to file a return for the tax credit but do not. If 50% of these households would file a return because the Department of Revenue notified them of eligibility at an average tax credit of $294, an increase in circuit breaker credits could be as much as $13,818,000 annually. Oversight assumes a two percent annual growth. Oversight assumes FTE and related expenses would be needed in DOR to process the additional workload. Oversight has ranged revenue losses and administrative expenses relating to this portion of the proposal.
SECTION 143.161-Dependency Deduction
Officials of the Office of Administration (COA) state this proposal increases the dependency deduction to $1,200 after January 1, 1998.
COA staff have assumed that this proposal would have an estimated impact of approximately ($65,400,000) in FY99, ($65,500,000) in FY2000 and ($65,600,000) in FY2001. The estimate is based on State of Missouri Individual Income Tax data, data from the Tax Expenditure Report, and population projections from the State Demographer.
Dependency Deduction for ages 65+
Officials of the Office of Administration (COA) state this portion of the proposal increases the dependency deduction an additional $1,000 for a dependent who is not residing in a facility qualified to receive federal or state funding and who has attained sixty-five years of age. This would have a revenue impact of approximately $2.5 million annually.
This proposal would result in a decrease in Total State Revenues.
| FISCAL IMPACT - State Government | FY 1999 | FY 2000 | FY 2001 |
| (10 Mo.) | |||
| GENERAL REVENUE FUND | |||
| Loss to General Revenue Fund | |||
| Increase in circuit breaker | |||
| credit claims | ($20,900,000) | ($21,300,000) | ($21,700,000) |
| Dependency deduction of $1200 | ($65,400,000) | ($65,500,000) | ($65,600,000) |
| Dependency deduction for 65+ | ($2,500,000) | ($2,500,000) | ($2,500,000) |
| Increase in circuit breaker | $0 to | $0 to | $0 to |
| credit claims due to notification | ($13,818,000) | ($14,094,360) | ($14,376,247) |
| FISCAL IMPACT - State Government | FY 1999 | FY 2000 | FY 2001 |
| (Continued) | (10 Mo.) | ||
| Cost to General Revenue Fund | |||
| Department of Revenue (DOR) - | |||
| Increase in Circuit Breaker Claims | |||
| Personal services | ($16,008) to | ($16,408) to | ($16,818) to |
| ($32,016) | ($32,817) | ($33,637) | |
| Fringe benefits | ($4,482) to | ($4,594) to | ($4,709) to |
| ($8,964) | ($9,189) | ($9,418) | |
| Expense and equipment | ($66,764) | ($59,801) | ($61,595) |
| Total Costs - DOR | ($87,254) to | ($80,803) to | ($83,122) to |
| ($107,744) | ($101,807) | ($104,650) | |
|
ESTIMATED NET EFFECT TO | |||
| GENERAL REVENUE FUND | ($88,887,254) | ($89,380,803) | ($89,883,122) |
| to | to | to | |
| ($102,725,744) | ($103,496,167) | ($104,280,897) | |
| 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 bill increases the qualifying income levels used to determine eligibility and the credit amount for the senior citizen/disabled veteran property tax credit against individual income tax. This credit is commonly known as "Circuit Breaker." The maximum level of income allowed to qualify is increased from the current amount of $15,000 to $25,000 in 1998 and thereafter. The minimum base is increased from the current level of $5,900 to $13,000 in 1999 and thereafter. The minimum base is the highest income level at which taxpayers receive the maximum amount of credit for property taxes paid. The bill also modifies the table from which the allowable circuit breaker tax credits are calculated, allows claimants who are between the age of 60 and 65 to qualify for the credit if they receive Social Security surviving spouse benefits, and requires the Department of Revenue to identify and notify taxpayers who are potentially eligible to receive the circuit breaker credit if they filed a return. In addition, the bill increases the dependency deduction from the current level of $400 per dependent to $1,200 for tax years 1998 and thereafter. An additional $1,000 deduction is authorized for a dependent who is at least 65 years of age who resides in the taxpayer's home, the dependent's home, or if the dependent does not receive Medicaid or state funding, while residing in certain care facilities.
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
Jeanne Jarrett, CPA
Director
June 1, 1998