FISCAL NOTE
Date Requested: January 10, 2024
Time Requested: 08:33 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2023 |
Introduced |
HB4444 |
|
|---|
| 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 reduce the amount of personal income tax paid by West Virginia taxpayers to $0 for those earning $80,000 or less.
Based on our interpretation, the legislation would amend §11-21-4e to be effective for taxable years beginning on or after January 1, 2025. The legislation amends the Personal Income Tax rates so that there is an effective rate of 0 percent on first $80,000 of taxable income ($40,000 for married filing separate) and 6.5 percent on taxable income in excess of $80,000 ($40,000 for married filing separate). The legislation as written increases the tax rate on taxable income over $80,000 ($40,000 for married filing separately). Therefore, as taxable income rises over the threshold, the tax benefit decreases and there would be a point where higher income taxpayers would incur an increased tax liability.
The legislation will amend existing Personal Income Tax code, which could cause some confusion regarding tax rates for the periods immediately prior to the effective period of the bill. Further, W.Va. Code §11-21-4g, enacted during the 2023 legislative session, which reduced tax rates and W.Va. Code §11-21-4h which allowed for future rate reductions would likely make the proposed legislation difficult to implement.
According to our interpretation, the proposed legislation would decrease General Revenue Fund collections by roughly $336.6 million in FY2025, $845.5 million in FY2026 and by slowly increasing amounts in subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $45,000 in FY2025.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2024
Increase/Decrease
(use"-") |
2025
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
45,000 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
45,000 |
0 |
| 2. Estimated Total Revenues |
0 |
336,600,000 |
845,500,000 |
Explanation of above estimates (including long-range effect):
Based on our interpretation, the legislation would amend §11-21-4e to be effective for taxable years beginning on or after January 1, 2025. The legislation amends the Personal Income Tax rates so that there is an effective rate of 0 percent on first $80,000 of taxable income ($40,000 for married filing separate) and 6.5 percent on taxable income in excess of $80,000 ($40,000 for married filing separate). The legislation as written increases the tax rate on taxable income over $80,000 ($40,000 for married filing separately). Therefore, as taxable income rises over the threshold, the tax benefit decreases and there would be a point where higher income taxpayers would incur an increased tax liability.
The legislation will amend existing Personal Income Tax code, which could cause some confusion regarding tax rates for the periods immediately prior to the effective period of the bill. Further, W.Va. Code §11-21-4g, enacted during the 2023 legislative session, which reduced tax rates and W.Va. Code §11-21-4h which allowed for future rate reductions would likely make the proposed legislation difficult to implement.
According to our interpretation, the proposed legislation would decrease General Revenue Fund collections by roughly $336.6 million in FY2025, $845.5 million in FY2026 and by slowly increasing amounts in subsequent fiscal years.
Additional administrative costs incurred by the State Tax Department would be $45,000 in FY2025.
Memorandum
The stated purpose of this bill is to reduce the amount of personal income tax paid by West Virginia taxpayers to $0 for those earning $80,000 or less.
There is a title defect, and this bill does not contemplate the 2023 amendments reducing personal income tax.
The title of the bill is defective in that it only references the reduction for individuals, joint filers, heads of household, estates and trusts and fails to reference the reduction for married individuals filing separately.
Further, the rate adjustments set forth in W.Va. Code §11-21-4g during the 2023 session are not contemplated since this bill was originally drafted prior to the 2024 session. Currently, the highest tax rate is 5.12%, and future rate reductions are contemplated by W.Va. Code §11-21-4h (2023).
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov