FISCAL NOTE

Date Requested: February 15, 2022
Time Requested: 09:27 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2565 Introduced HB4762
CBD Subject: Taxation


FUND(S):

General Revenue Fund

Sources of Revenue:

General Fund

Legislation creates:

Decreases Existing Revenue, 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 exempt, from state income tax, salaries of law enforcement officers, firefighters, EMS workers, and correctional officers. This bill would exempt the following first responders from state income tax: professional firefighter, emergency medical technician, paramedic, emergency medical vehicle operator, emergency medical responder, mobile critical care nurse, advanced care technician, local police officer, state police officer, DNR police officer, and correctional officer. Absent an effective date in the bill, this credit would be available for tax years beginning on or after January 1, 2023. According to data from the Consolidated Public Retirement Board, the average salary of these employees is $46,325. This average salary was calculated under the assumption that all retirement system participants were employed and contributing to the retirement system for all 12 months of the fiscal year. The revenue loss associated with exemption of wage and salary income of certain State and local employees from State income taxes would be approximately $32.4 million per year. There would be some additional revenue loss due to the need to also exempt certain employees of the federal government from State income taxes. Additional administrative costs incurred by the State Tax Department would be $61,500 in FY2024 and $45,000 in 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 0 45,000
Personal Services 0 0 45,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 -32,400,000 -32,400,000


Explanation of above estimates (including long-range effect):


This bill would exempt the following first responders from state income tax: professional firefighter, emergency medical technician, paramedic, emergency medical vehicle operator, emergency medical responder, mobile critical care nurse, advanced care technician, local police officer, state police officer, DNR police officer, and correctional officer. Absent an effective date in the bill, this credit would be available for tax years beginning on or after January 1, 2023. According to data from the Consolidated Public Retirement Board, the average salary of these employees is $46,325. This average salary was calculated under the assumption that all retirement system participants were employed and contributing to the retirement system for all 12 months of the fiscal year. The revenue loss associated with exemption of wage and salary income of certain State and local employees from State income taxes would be approximately $32.4 million per year. There would be some additional revenue loss due to the need to also exempt certain employees of the federal government from State income taxes. Additional administrative costs incurred by the State Tax Department would be $61,500 in FY2024 and $45,000 in subsequent fiscal years.



Memorandum


The stated purpose of this bill is to exempt, from state income tax, salaries of law enforcement officers, firefighters, EMS workers, and correctional officers. The state Constitution, Article X, Section 1 gives the Legislature authority to exempt incomes below a certain level from taxation, but that authority does not extend to exempting whole categories of income, or classes of workers, from taxation. There is also concern that preferential treatment for a large group of state and local government employees relative to federal civil service employees would conflict with 4 U.S. Code ยง111 which provides, in part: (a) General rule. The United States consents to the taxation of pay or compensation for personal service as an officer or employee of the United States, a territory or possession or political subdivision thereof, the government of the District of Columbia, or an agency or instrumentality of one or more of the foregoing, by a duly constituted taxing authority having jurisdiction, if the taxation does not discriminate against the officer or employee because of the source of the pay or compensation.



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kerri.r.petry@wv.gov