SB 0003 - Fiscal Note

Fiscal Note - SB 0003 - Authorizes state income tax deduction for school tuition, attendance fees, supplies and transportation costs

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 0527-01

BILL NO.: SB 3

SUBJECT: Education, Elementary and Secondary; Revenue Department; Taxation and Revenue - General; Taxation and Revenue - Income

TYPE: Original

DATE: January 12, 1999

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
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 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 of the Department of Revenue (DOR) did not respond to our request for fiscal impact. However, in responding to a similar proposal during the last session, DOR stated the proposal would add 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 stated there 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 assumed that at least 50,000 taxpayers would claim this deduction and requested 4 Tax Collection Technician I positions to address this additional workload. The Division of Taxation also requested 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) did not respond to our request for fiscal impact. However, in responding to a similar proposal during the last session, COA stated the proposal would allow an individual a $2,500 deduction for paying the tuition or school expenses for a secondary school student.

COA staff stated 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 2000	FY 2001	FY 2002
	(10 Mo.)
Loss to General Revenue Fund
Educational Expense Income
Tax Deduction	$0	($7,769,655)	($7,769,655)
FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
(continued)	(10 Mo.)
ESTIMATED NET EFFECT TO
GENERAL REVENUE FUND	$0	($7,769,655)	($7,769,655)
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
	(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 would authorize, for all taxable years beginning on or after January 1, 1999, a state income tax deduction for school tuition, attendance fees, supplies, and transportation costs, up to a maximum of $2,500 for each dependent or pupil in grades nine through twelve. The deduction may be taken by individual and corporate taxpayers.

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 Elementary and Secondary Education

NOT RESPONDING: Department of Revenue and Office of Administration - Division of Budget and Planning

Jeanne Jarrett, CPA

Director

January 12, 1999