SB 0437 - Fiscal Note

Fiscal Note - SB 0437 - Establishes flat individual income tax rate

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 1939-01

BILL NO.: SB 437

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

TYPE: Original

DATE: March 16, 1999

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
General Revenue	$0	($409,409,000)	($433,973,540)
Total Estimated Net Effect on All State Funds	$0	($409,409,000)	($433,973,540)

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 from the Department of Revenue (DOR) state the proposal would create a reduction in the cost of forms, telefile charges, tax season employees, and full-time employees. DOR also assumes there would be a reduction in the taxpayer's cost of compliance. DOR states the amount of savings is unknown at this time.

DOR state the proposal would require modifications to the income tax system. The Division of Taxation and Collections estimates the modifications, including programming changes, would require 2,076 hours of overtime at a cost of $62,425. Modifications to the income tax return and schedules would be completed with existing resources. State Data Center charges would increase due to the additional storage and fields to be captured. Funding in the amount of $13,510 would be requested for implementation costs and $945 for ongoing costs per year.

Officials from the University of Missouri project for tax year 2000 (returns filed in 2001) a reduction in income tax revenues of $409,409,000.

Officials from the Office of Administration (COA) agree with the projections of the University of Missouri for the tax year 2000. COA assumes a six percent growth rate.

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
	(6 Mo.)
GENERAL REVENUE FUND
Loss - General Revenue Fund
Reduction in income tax rate	$0	($409,409,000)	($433,973,540)
Cost - Department of Revenue
Reprogramming costs	$0	($82,177)	($945)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND	$0	($409,491,177)	($433,974,485)
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
	(6 Mo.)
	$0	$0	$0
FISCAL IMPACT - Small Business
Small businesses would be expected to be fiscally impacted to the extent that they would incur lower income tax rates.

DESCRIPTION

This proposal would change current income tax law by imposing on individuals a flat state income tax rate of four percent. Deductions from federal adjusted gross income allowed in

determining Missouri taxable income would be limited to the personal exemption, dependency exemption and any adjustments for tax-free bonds and railroad retirement benefits. A resident taxpayer would be allowed a personal exemption of $10,000 and an equivalent amount for his or her spouse. A head of household would be allowed a personal exemption of $15,000, and a surviving spouse would be allowed a personal exemption of $20,000. Dependency exemptions would be $2,000. The proposal would specify positive and negative modifications to federal adjusted gross income, as well as the income taxation of non-residents, part-year residents, and non-resident partners of partnerships.

The proposal has an effective date of January 1, 2000, and would apply to all taxable years after December 31, 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

Division of Budget and Planning

University of Missouri

Jeanne Jarrett, CPA

Director

March 16, 1999