FISCAL NOTE
Date Requested: February 08, 2017
Time Requested: 06:35 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1043 |
Introduced |
SB30 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund, local governments
Sources of Revenue:
General Fund,Other Fund local governments
Legislation creates:
Neither Program nor Fund
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this bill is to allow local units of government to lower personal property taxes by imposing local sales taxes; set forth a purpose; to not require an agreement among local levying bodies; to set the amount of sales tax permitted; determine levy setoff, and implementation to provide a trigger for prohibiting the collection of future personal property taxes by any unit of state government; and to provide for the sunset of the article under certain conditions.
From a global perspective, County Commissions imposed nearly $158.8 million in personal property taxes in TY2016. That same year, School Boards imposed nearly $387.4 million in personal property taxes and Municipal government imposed more than $40.0 million. The municipal share of total personal property taxes imposed is roughly 5 percent while the municipal share of total property taxes imposed is closer to 7 percent. The relatively lower municipal share of personal property tax is attributable to a greater than average share of industrial activity, including both mining and manufacturing located outside of incorporated municipalities. In addition to other small sources, personal property taxes generally include tax imposed on certain mobile homes, automobiles, machinery, equipment, inventory and active natural gas well valuations.
The bill allows three government types to levy a sales tax: county boards of education, county commissions, and municipalities. The combined increase in the sales tax rate within a county may be 2 percent. Should every county pursue the full increase in sales tax rate, the combined revenue for local governments would be approximately $400 million. The revenue collection distribution would be highly unequal. Counties with high concentrations of retail and service activity, mostly urbanized areas, will receive the majority of the collections. Each levying body must then reduce its personal property tax levy rate “by an amount equal to 80 percent of the amount of money generated by the sales tax.” Urbanized areas may also lose less property tax revenue than rural areas with significant industrial personal property, including natural gas properties and mining equipment.
The bill further states that after the effective date of this article, any future personal property tax collection by any unit of state government is prohibited. This would essentially end all personal property tax collections. In TY2016, personal property tax collections for all governments including those for the State exceeded $588.6 million. The full revenue impact will be a loss of approximately $200.0 million statewide, unevenly distributed across governing units.
Estimated costs to the Tax Department will be $987,000 in FY2018 and $385,000 in each subsequent year.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2017
Increase/Decrease
(use"-") |
2018
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
987,000 |
385,000 |
| Personal Services |
0 |
275,000 |
275,500 |
| Current Expenses |
0 |
230,000 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
12,000 |
0 |
| Other |
0 |
470,000 |
110,000 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
From a global perspective, County Commissions imposed nearly $158.8 million in personal property taxes in TY2016. That same year, School Boards imposed nearly $387.4 million in personal property taxes and Municipal government imposed more than $40.0 million. The municipal share of total personal property taxes imposed is roughly 5 percent while the municipal share of total property taxes imposed is closer to 7 percent. The relatively lower municipal share of personal property tax is attributable to a greater than average share of industrial activity, including both mining and manufacturing located outside of incorporated municipalities. In addition to other small sources, personal property taxes generally include tax imposed on certain mobile homes, automobiles, machinery, equipment, inventory and active natural gas well valuations.
The bill allows three government types to levy a sales tax: county boards of education, county commissions, and municipalities. The combined increase in the sales tax rate within a county may be 2 percent. Should every county pursue the full increase in sales tax rate, the combined revenue for local governments would be approximately $400 million. The revenue collection distribution would be highly unequal. Counties with high concentrations of retail and service activity, mostly urbanized areas, will receive the majority of the collections. Each levying body must then reduce its personal property tax levy rate “by an amount equal to 80 percent of the amount of money generated by the sales tax.” Urbanized areas may also lose less property tax revenue than rural areas with significant industrial personal property, including natural gas properties and mining equipment.
The bill further states that after the effective date of this article, any future personal property tax collection by any unit of state government is prohibited. This would essentially end all personal property tax collections. In TY2016, personal property tax collections for all governments including those for the State exceeded $588.6 million. The full revenue impact will be a loss of approximately $200.0 million statewide, unevenly distributed across governing units.
Estimated costs to the Tax Department will be $987,000 in FY2018 and $385,000 in each subsequent year.
Memorandum
The stated purpose of this bill is to allow local units of government to lower personal property taxes by imposing local sales taxes; set forth a purpose; to not require an agreement among local levying bodies; to set the amount of sales tax permitted; determine levy setoff, and implementation to provide a trigger for prohibiting the collection of future personal property taxes by any unit of state government; and to provide for the sunset of the article under certain conditions.
As proposed, the bill fails to define a number of terms, including local units of government, levying body, and sales tax agent, and to indicate whether county boards of education, county commissions, and municipalities are the only local units of government allowed to impose a sales tax. The proposed bill does not mention what the sales tax base will be and fails to make any provision for who would collect, administer, or enforce the tax. Further, there is no provision that gives the Tax Commissioner (or anyone else) the authority to promulgate rules regarding collection, administration, or enforcement of the proposed sales tax.
The structure of the proposed bill limits the sale tax imposed within the county to an aggregate of 2 percent, made up of up to 1 percent by a county board of education, 0.5 percent by a county commission, and 0.5 percent by municipalities. However, in counties with multiple municipalities, the possibility exists that multiple levying bodies may be blocked from participating in the benefits due to the maximum aggregate tax being reached for each county.
The provision that each levying body reduce its personal property tax to 80 percent of the amount of money generated from the sale tax creates a timing issue in determining what that amount will be before the tax is imposed.
The proposed bill does not provide a certain effective date, as the bill would not take effect until five or more county commissions or county boards of education elect to exercise the option. This in turn renders the sunset provision ineffective. It is further unclear whether the five or more county commissions or county boards of education required to establish the effective date may be a combination of the two, and the bill does not include municipalities among the entities that can make up the five.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov