COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. No.: 2344-01

Bill No.: SB 5

Subject: Taxation and Revenue - Sales and Use

Type: Original

Date: September 10, 2003

---

FISCAL SUMMARY

ESTIMATED NET EFFECT ON GENERAL REVENUE FUND
FUND AFFECTED	FY 2004	FY 2005	FY 2006
General Revenue	$46,407,525	$285,759,800	$146,559,800
Total Estimated Net Effect on General Revenue Fund*	$46,407,525	$285,759,800	$146,559,800

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2004	FY 2005	FY 2006
Highway Funds	$3,200,000	$18,200,000	$9,400,000
Total Estimated Net Effect on All State Funds*	$3,200,000	$18,200,000	$9,400,000

* 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 5 pages.

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 2004	FY 2005	FY 2006
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 2004	FY 2005	FY 2006
Local Government	$0	$0	$0

FISCAL ANALYSIS

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. However, 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%.

This legislation also 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.

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).

Oversight reduced the amount requested by DOR for postage to $40,200 annually to reflect the cost at the current bulk rate.

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

Assumptions:

• The sales tax base is based upon the FY 2004 Budget and Planning/Senate staff consensus forecast.
• Regular sales tax will increase 2.5% in FY 2005 and FY 2006.
• Motor vehicle sales tax will increase 3.0% in FY 2005 and FY 2006.
• If approved by voters, the tax increase becomes effective April 1, 2004 and there will be a one-month lag associated with collection changes.




These assumptions yield the following revenue impact:





(millions of dollars) FY 2004 FY 2005 FY 2006

Regular Sales Tax $47.3 $267.6 $137.2

MV Sales Tax - General Revenue $3.2 $18.2 $9.4

MV Sales Tax - Highways $3.2 $18.2 $9.4

In response to a similar proposal, officials from the Secretary of State (SOS) assume statewide newspaper publication of constitutional amendments cost approximately $1,161 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 = $3,485 per column inch. SOS estimates the total number of inches for this amendment to be 15 inches, which includes title header and certification paragraph. $3,485 x 15 inches = $52,275.





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.





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 November 2003.





ASSUMPTION (continued)





This proposal would result in an increase in Total State Revenues.





FISCAL IMPACT - State Government	FY 2004 (3 Mo.)	FY 2005	FY 2006
GENERAL REVENUE FUND
Income - General Revenue
Increase in sales tax	$47,300,000	$267,600,000	$137,200,000
Increase in MV sales tax	$3,200,000	$18,200,000	$9,400,000
Total Income - GR	$50,500,000	$285,800,000	$146,600,000
Cost - Dept. of Revenue
Postage	($40,200)	($40,200)	($40,200)
Cost - Secretary of State
Publication costs	($52,275)	$0	$0
Cost - Office of Administration
Special election costs	($4,000,000)	$0	$0
TOTAL ESTIMATED NET EFFECT ON GENERAL REVENUE FUND*	$46,407,525	$285,759,800	$146,559,800
* This proposal is permissive. Voter approval would be required before fiscal impact would be realized.
HIGHWAY FUNDS
Income - Highway Funds
Increase in MV sales tax	$3,200,000	$18,200,000	$9,400,000
TOTAL ESTIMATED NET EFFECT ON HIGHWAY FUNDS*	$3,200,000	$18,200,000	$9,400,000
* This proposal is permissive. Voter approval would be required before fiscal impact would be realized.





FISCAL IMPACT - Local Government	FY 2004 (3 Mo.)	FY 2005	FY 2006
	$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.





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

September 10, 2003