COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.: 2420-04
Bill No.: Truly Agreed to and Finally Passed HCS for SCS for SBs 3, 8 & 9
Subject: Revenue Dept.; Taxation and Revenue-Income
Type: Original
Date: September 14, 2001
FISCAL SUMMARY
| FUND AFFECTED | FY 2002 | FY 2003 | FY 2004 |
| General Revenue | ($33,687,672) | $0 | $0 |
| $0 | $0 | $0 | |
| Total Estimated
Net Effect on All State Funds |
($33,687,672) | $0 | $0 |
| FUND AFFECTED | FY 2002 | FY 2003 | FY 2004 |
| Total Estimated
Net Effect on All Federal Funds |
$0 | $0 | $0 |
| FUND AFFECTED | FY 2002 | FY 2003 | FY 2004 |
| 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 includes in the calculation of the federal income tax deduction the amount of the federal rebate allowed by section 6428 of the Internal Revenue Code.
The DOR anticipates additional phone inquiries and walk-ins during tax season and will need 2 temporary tax season employees during January through April to assist in answering the income tax hotline, each handling 8,000-phone inquiries.
The DOR drafted a worksheet that would be used to calculate the federal income tax deduction with the changes in this legislation. The DOR anticipates using the normal federal tax edits and instructions with additional detail included to address the advanced credit. This will result in minimal impact to the DOR. However, if the DOR is required to key all of the information on the worksheet the DOR would have a much larger impact.
Officials of the Office of Administration (COA) - Budget and Planning (BAP) state this proposal will exclude the credit for the ten percent federal income bracket from reducing the federal income tax deduction on the Missouri individual income tax.
The IRS estimates that $771 million in credits for the new 10% tax bracket will be issued to Missourians. Missouri tax data indicates that 16% of the individual income tax returns are over the deduction limit for federal income tax. The tax liability for these returns will not change due to the federal credit. A 4.5% average tax rate is assumed. BAP estimates the net effect on state funds to be $29.1 million for FY02.
Based on tax year 1999 marginal tax calculations, Oversight assumes a 5.2% tax rate. Oversight estimates the fiscal impact of this proposal to be $33.7 million.
This proposal would result in a decrease in Total State Revenues.
| FISCAL IMPACT - State Government | FY 2002 | FY 2003 | FY 2004 |
| GENERAL REVENUE FUND | |||
| Cost - Dept. of Revenue | |||
| Personal Service (2 Temp. FTE) | ($10,392) | $0 | $0 |
|
Loss to General Revenue Fund Forgone revenue from including federal tax payment and credit deduction |
($33,677,280) |
$0 |
$0 |
|
ESTIMATED NET EFFECT TO GENERAL REVENUE FUND |
($33,687,672) |
$0 |
$0 |
| FISCAL IMPACT - Local Government | FY 2002 | FY 2003 | FY 2004 |
| $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 excludes the credit for the ten percent income tax bracket, including any federal advance payment under Section 6428 from reducing the federal income tax deduction.
This legislation contains an emergency clause.
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
Jeanne Jarrett, CPA
Director
September 14, 2001