COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.: 4701-01
Bill No.: SB 1280
Subject: Taxation and Revenue - Sales and Use
Type: Original
Date: March 3, 2004
FISCAL SUMMARY
| FUND AFFECTED | FY 2005 | FY 2006 | FY 2007 |
| General Revenue | $269,504,540 | $197,259,800 | $101,559,800 |
| Total Estimated
Net Effect on General Revenue Fund* |
$269,504,540 | $197,259,800 | $101,559,800 |
| FUND AFFECTED | FY 2005 | FY 2006 | FY 2007 |
| Highway Funds | $17,400,000 | $12,600,000 | $6,500,000 |
| Total Estimated
Net Effect on All State Funds* |
$17,400,000 | $12,600,000 | $6,500,000 |
* This proposal is permissive. Voter approval would be required before fiscal impact would be realized.
Numbers within parentheses: ( ) indicate costs or losses.
This fiscal note contains 6 pages.
| FUND AFFECTED | FY 2005 | FY 2006 | FY 2007 |
| Total Estimated
Net Effect on All Federal Funds |
$0 | $0 | $0 |
| FUND AFFECTED | FY 2005 | FY 2006 | FY 2007 |
| Local Government | $0 | $0 | $0 |
ASSUMPTION
Department of Revenue (DOR) officials state this legislation will provide an increase in revenues over the course of three years, with intent to slowly phase it out during that time. This language states that in the third year the rate will be reduced from 4 1/4% to 4 1/8% but does not specify that at the beginning of the fourth year, the tax rate will be returned to the original rate of 4%.
The emergency clause states that it will become effective on the first month after the special election. The language needs to be changed to make it effective the first day of the first calendar quarter after the special election in order to provide sufficient notice to the taxpayers.
Business Tax will be responsible for notifying the 150,000 sales tax businesses every time the tax rate is changed (over the 3 year duration). The three tax rate changes (four, if the rate is to be changed back to 4% after the third year) will also require programming to send notifications to the public. This will require 173 hours of programming per year/rate change at a cost of $5,771 (also, per year).
Oversight reduced the amount requested by DOR for postage to $40,200 annually to reflect the cost at the current bulk rate. Since DOR did not request programming changes in their prior responses to similar bills, Oversight assumes DOR can complete any necessary changes with existing resources.
ASSUMPTION (continued)
Officials from the Office of Administration, Budget and Planning (BAP) assume this proposal would increase the sales tax by:
1/2 cent for one year after implementation
1/4 cent for the subsequent year
1/8 cent for the subsequent year
Further, BAP assumes the proposal becomes effective Sep. 1, 2004, and is effective for 10 months in FY05, all of FY06 and FY07, and 2 months of FY08.
The regular sales tax base for FY05 is $1,844.5 million. This is based on the consensus revenue estimate. BAP assumes the base will grow 3% in each succeeding fiscal year.
The GR motor vehicle sales tax base for FY05 is $125.5 million. A like amount goes to the highway fund. This is based on the consensus revenue estimate. BAP assumes the base will grow 3% in each succeeding fiscal year.
Based on these assumptions, this proposal has the following impacts, in millions of dollars:
(millions of dollars) FY 2005 FY 2006 FY 2007 FY 2008
Regular Sales Tax $256.2 $184.7 $95.1 $14.0
MV Sales Tax - General Revenue $17.4 $12.6 $6.5 $1.0
MV Sales Tax - Highways $17.4 $12.6 $6.5 $1.0
Officials from the Secretary of State (SOS) assume statewide newspaper publication of constitutional amendments cost approximately $1,228 per column inch based on estimate provided by the Missouri Press Service x 3 for multiple printings as required by the Constitution and state statute = $3,684 per column inch. SOS estimates the total number of inches for this amendment to be 15 inches, which includes title header and certification paragraph. $3,684 x 15 inches = $55,260.
In response to a similar proposal, officials from the Office of Administration assumed the election costs for a special election would be approximately $4 million.
ASSUMPTION (continued)
Since this legislation is subject to voter referendum, Oversight assumes this proposal would have no state fiscal impact without voter approval. Oversight assumes the proposal would be on the ballot for the first Tuesday in August 2004.
This proposal would result in an increase in Total State Revenues.
| FISCAL IMPACT - State Government | FY 2005
(10 Mo.) |
FY 2006 | FY 2007 |
|
GENERAL REVENUE FUND |
|||
| Income - General Revenue | |||
| Increase in sales tax | $256,200,000 | $184,700,000 | $95,100,000 |
| Increase in MV sales tax | $17,400,000 | $12,600,000 | $6,500,000 |
| Total Income - GR | $273,600,000 | $197,300,000 | $101,600,000 |
|
|
|||
| Cost - Dept. of Revenue | |||
| Postage | ($40,200) | ($40,200) | ($40,200) |
| Cost - Secretary of State | |||
| Publication costs | ($55,260) | $0 | $0 |
| Cost - Office of Administration | |||
| Special election costs | ($4,000,000) | $0 | $0 |
|
|
|||
| TOTAL ESTIMATED NET EFFECT ON GENERAL REVENUE FUND* |
$269,504,540 |
$197,259,800 |
$101,559,800 |
| * This proposal is permissive. Voter approval would be required before fiscal impact would be realized. | |||
|
|
|||
| FISCAL IMPACT - State Government | FY 2005
(10 Mo.) |
FY 2006 | FY 2007 |
|
HIGHWAY FUNDS |
|||
| Income - Highway Funds | |||
| Increase in MV sales tax | $17,400,000 | $12,600,000 | $6,500,000 |
|
|
|||
| TOTAL ESTIMATED NET EFFECT ON HIGHWAY FUNDS* |
$17,400,000 |
$12,600,000 |
$6,500,000 |
| * This proposal is permissive. Voter approval would be required before fiscal impact would be realized. |
| FISCAL IMPACT - Local Government | FY 2005
(10 Mo.) |
FY 2006 | FY 2007 |
| $0 | $0 | $0 |
FISCAL IMPACT - Small Business
Small businesses would be expected to collect/pay the increased sales tax as a result of this proposal.
DESCRIPTION
This proposal increases the sales tax by 1/2% for one year, then lowers the increase to 1/4% for one year, then lowers the increase to 1/8% for one year, and finally returns the sales tax rate to the current levy.
The proposal has a referendum clause for August 2004, and an effective date of October 1, 2004, if approved by the voters.
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
Budget and Planning
Secretary of State
Mickey Wilson, CPA
Director
March 3, 2004