FISCAL NOTE
Date Requested: January 12, 2022
Time Requested: 04:39 PM |
| Agency: |
Tax & Revenue Department, WV State |
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| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1080 |
Introduced |
SB104 |
|
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| CBD Subject: |
|
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FUND(S):
State Road Fund
Sources of Revenue:
Other Fund State Road Fund
Legislation creates:
Increases Revenue From Existing Sources, Increases Existing Expenses
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this bill is to create an annual adjustment to the motor fuel excise tax and provide for a mechanism for calculating the adjustment.
According to our interpretation, the proposed bill would require an annual adjustment of the flat-rate component of the Motor Fuel Excise Tax. The adjustment would be based on the percentage increase in the average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of the current calendar year over the third quarter of the previous year. An adjustment would only occur if there was an increase in the Index. The adjustment would be calculated and become effective on December 1 of each year after the effective date of July 1, 2022.
Per our interpretation, the effect of the bill would be cumulative. The adjustment is calculated based on the change in Consumer Price Index for Urban Wage Earners and Clerical Workers which has fluctuated significantly over the past year. Given the current economic climate, any estimate based on an inflationary measure should be reviewed with caution. Based on current projections that inflation will normalize by CY2023, the passage of the proposed legislation would increase State Road Fund collections by $3.7 million in FY2023, $9.5 million in FY2024, and $14.3 million in FY2025 with additional inflationary increases thereafter.
Additional administrative costs incurred by the Motor Fuel Tax Administrative Fund would be $25,000 in FY2023 and $10,000 in FY2024 and subsequent fiscal years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2022
Increase/Decrease
(use"-") |
2023
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
25,000 |
10,000 |
| Personal Services |
0 |
5,000 |
5,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
20,000 |
5,000 |
| 2. Estimated Total Revenues |
0 |
3,700,000 |
0 |
Explanation of above estimates (including long-range effect):
According to our interpretation, the proposed bill would require an annual adjustment of the flat-rate component of the Motor Fuel Excise Tax. The adjustment would be based on the percentage increase in the average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of the current calendar year over the third quarter of the previous year. An adjustment would only occur if there was an increase in the Index. The adjustment would be calculated and become effective on December 1 of each year after the effective date of July 1, 2022.
Per our interpretation, the effect of the bill would be cumulative. The adjustment is calculated based on the change in Consumer Price Index for Urban Wage Earners and Clerical Workers which has fluctuated significantly over the past year. Given the current economic climate, any estimate based on an inflationary measure should be reviewed with caution. Based on current projections that inflation will normalize by CY2023, the passage of the proposed legislation would increase State Road Fund collections by $3.7 million in FY2023, $9.5 million in FY2024, and $14.3 million in FY2025 with additional inflationary increases thereafter.
Additional administrative costs incurred by the Motor Fuel Tax Administrative Fund would be $25,000 in FY2023 and $10,000 in FY2024 and subsequent fiscal years.
Memorandum
The stated purpose of this bill is to create an annual adjustment to the motor fuel excise tax and provide for a mechanism for calculating the adjustment.
The bill appears to require an annual adjustment of the flat-rate component of the Motor Fuel Excise Tax. The application of the adjustment is unclear because both the flat-rate and variable-rate components of the Motor Fuel Excise Tax are referenced in subsection (a). The bill would, in effect, convert the “flat” rate into another variable rate. The basis and timing of the adjustments made under the bill would create administrative difficulties, both for the Tax Division and for those charged with paying the tax.
Under current statute, the variable rate component of the tax is adjusted annually, based on the average wholesale price of motor fuel for the previous year. The Tax Commissioner is required to give thirty days’ notice of a change in the variable rate, and the change becomes effective on January 1 of the following year. The proposed bill would give taxpayers no prior notice of changes in the “flat” rate component, and the effective date of such changes would be a different date than the effective date for changes in the variable component.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov