COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. NO.: 2992-02
BILL NO.: SCS for SB's 599 and 531
SUBJECT: Education, Elementary and Secondary; Taxation and Revenue-General-Income
TYPE: Original
DATE: February 18, 2000
FISCAL SUMMARY
| FUND AFFECTED | FY 2001 | FY 2002 | FY 2003 |
| General Revenue | $0 | ($7,769,655) | ($7,769,655) |
| Total Estimated
Net Effect on All State Funds |
$0 | ($7,769,655) | ($7,769,655) |
| FUND AFFECTED | FY 2001 | FY 2002 | FY 2003 |
| None | |||
| Total Estimated
Net Effect on All Federal Funds |
$0 | $0 | $0 |
| FUND AFFECTED | FY 2001 | FY 2002 | FY 2003 |
| Local Government | $0 | $0 | $0 |
Numbers within parentheses: ( ) indicate costs or losses.
This fiscal note contains 3 pages.
ASSUMPTION
Officials of the Department of Revenue (DOR) state this legislation allows a state income tax deduction for tuition, attendance fees, supplies and transportation costs, paid by individual and corporate taxpayers, for each dependent or pupil in grades nine through twelve. This deduction is not to exceed $2,500 for each dependent or pupil and will become effective January 1, 2001.
ADMINISTRATIVE IMPACT:
The number of taxpayers eligible for this deduction is unknown at this time. The
Division of Taxation would need one temporary tax season employee ($8.00 an hour) for every 15,000 returns filed with this subtraction and one Tax Processing Tech I for every 3,000 pieces of correspondence received regarding the subtraction. The Division of Taxation would also need one Tax Processing Tech I (6 months) for every 30,000 income tax errors and one Tax Processing Tech I for every 12,000 corporate tax errors generated by this legislation.
This legislation would require modifications to the individual income tax system. The Division of Taxation estimates these modifications, including programming changes, would require 1,816 hours of overtime at a cost of $46,617. Modifications to the income tax returns 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 $11,821 would be requested for implementation costs.
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.
In a similar proposal officials of the Office of Administration (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 FY2001 to take advantage of this new deduction.
This proposal would result in a decrease in Total State Revenues.
| FISCAL IMPACT - State Government | FY 2001 | FY 2002 | FY 2003 |
| (6 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 2001
(6 Mo.) |
FY 2002 | FY 2003 |
| $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 both individuals and corporate taxpayers, for the costs of school tuition, attendance fees, school supplies or transportation costs for students in grades nine through twelve. The deduction is capped at $2,500 per dependent. This proposal shall become effective on January 1, 2001, and shall apply to all taxable years beginning after December 31, 2000.
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
Department of Elementary and Secondary Education
Office of Administration
Jeanne Jarrett, CPA
Director
February 18, 2000