COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. NO.: 4415-01
BILL NO.: SB 992
SUBJECT: Retirement Systems and Benefits-General; Revenue Dept.; Taxation and Revenue-Income
TYPE: Original
DATE: March 24, 2000
FISCAL SUMMARY
| FUND AFFECTED | FY 2001 | FY 2002 | FY 2003 |
| General Revenue | $0 | $1,616,490 | $1,616,490 |
| Total Estimated
Net Effect on All State Funds |
$0 | $1,616,490 | $1,616,490 |
| FUND AFFECTED | FY 2001 | FY 2002 | FY 2003 |
| 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 clarifies that the pension exemption will apply only when the pension is included in the taxpayers federal adjusted gross income and not otherwise subtracted.
This proposal would have little or no administrative impact to the Department of Revenue.
Officials of the Office of Administration (COA) state that currently taxpayers that have Railroad Retirement Benefits can subtract their retirement benefits from their adjusted gross income on their Missouri income tax return. These same taxpayers may currently also take the pension exemption on the Missouri income tax return. This proposal does not allow the pension exemption for Railroad Retirement Benefits, because they are already excluded from adjusted gross income. This would eliminate deducting the benefits twice.
According to Table 545 in the 1999 Statistical Abstract, Railroad Retirement Benefits are $8 billion nationally. COA staff assume that 1.9% of this total is paid to Missourians. A 4.5% marginal tax rate was assumed.
According to the actuary section of the Railroad Retirement Board, there are approximately 315,100 railroad retirees nationally. Dividing $8 billion by the 315,100 retirees yields an average pension of $25,400 annually. Oversight assumes that 1.9% of the 315,100 retirees (5,987) are located in Missouri. The maximum amount of the pension exemption is $6,000. Oversight has calculated the revenue impact of this proposal by multiplying the $6,000 by 5,987 retirees and assuming a 4.5% marginal tax rate. This would yield a savings of $1,616,490 annually by eliminating the ability to deduct Railroad Retirement Benefits twice.
This proposal would result in an increase in Total State Revenues.
| FISCAL IMPACT - State Government | FY 2001
(10 Mo.) |
FY 2002 | FY 2003 |
| GENERAL REVENUE FUND | |||
| Savings to General Revenue Fund | |||
| Elimination of Railroad Retirement Benefits being deducted twice |
$0 |
$1,616,490 |
$1,616,490 |
| ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND |
$0 |
$1,616,490 |
$1,616,490 |
| FISCAL IMPACT - Local Government | FY 2001
(10 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
The exemptions provided for in Section 143.124, RSMo, shall apply to any annuity, pension or retirement allowance as defined in subsection 1 of this section, so long as the amounts are included in the federal adjusted gross income and have not otherwise been deducted from federal adjusted gross income when determining Missouri taxable income. A pension exemption will apply to any annuity, pension or retirement allowance provided by the United States, Missouri, any other state or any political subdivision or agency or institution of this or any other state.
Currently, the maximum amount of combined government and private pension exemptions allowed is $6,000. If the taxpayer's income exceeds the limitation for the full pension exemption, the taxpayer may still qualify for a partial exemption. The exemption amount must be decreased by the amount the income exceeds the limitation.
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
Railroad Retirement Board
Jeanne Jarrett, CPA
Director
March 24, 2000