FISCAL NOTE
Date Requested: March 02, 2021
Time Requested: 11:40 AM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2347 |
Introduced |
SB515 |
|
|---|
| CBD Subject: |
Corporations |
|---|
|
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 provide new graduates of an in-state or out-of-state higher education institution, community or technical college, or trade school, up to a $50,000 tax modification to the income tax of the graduate for up to four taxable years; provide rule-making authority to the Tax Commissioner; and remove expired language from this section.
This bill would allow for a person graduating from an in-state or out-of-state higher education institution, community or technical college, or trade school to claim a modification from personal income tax of up to $50,000 of earned income in any given tax year. This modification would be in effect for the subsequent three years after graduation or when the graduate moves outside of the state, whichever comes first. According to the West Virginia Higher Education Policy Commission, there were 17,090 graduates of in-state higher education institutions and community or technical colleges as of 2020, with approximately 9,160 participating in the workforce. We are unable to determine the approximate number of recent graduates of in-state and out-of-state higher education institutions and community or technical colleges who live in West Virginia. We are unable to accurately estimate the revenue loss to the General Revenue Fund attributable to passage of this bill, but the loss would be substantial. If the qualified graduate has taxable income of at least $50,000 absent this proposed modification, then the value of the modification would be between $2,175 and $3,250 depending on marginal tax rates. Assuming that the tax credit were restricted to only graduates from in-state schools and the average taxable income of 9,160 graduates is at least $50,000, then the loss from the initial group would be between $19.9 million and $29.8 million in the first year of effect with increasing cost of more graduates are added over the ensuing three years.
Administrative costs would be $10,000 in FY2023.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2021
Increase/Decrease
(use"-") |
2022
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
0 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
0 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
This bill would allow for a person graduating from an in-state or out-of-state higher education institution, community or technical college, or trade school to claim a modification from personal income tax of up to $50,000 of earned income in any given tax year. This modification would be in effect for the subsequent three years after graduation or when the graduate moves outside of the state, whichever comes first. According to the West Virginia Higher Education Policy Commission, there were 17,090 graduates of in-state higher education institutions and community or technical colleges as of 2020, with approximately 9,160 participating in the workforce. We are unable to determine the approximate number of recent graduates of in-state and out-of-state higher education institutions and community or technical colleges who live in West Virginia. We are unable to accurately estimate the revenue loss to the General Revenue Fund attributable to passage of this bill, but the loss would be substantial. If the qualified graduate has taxable income of at least $50,000 absent this proposed modification, then the value of the modification would be between $2,175 and $3,250 depending on marginal tax rates. Assuming that the tax credit were restricted to only graduates from in-state schools and the average taxable income of 9,160 graduates is at least $50,000, then the loss from the initial group would be between $19.9 million and $29.8 million in the first year of effect with increasing cost of more graduates are added over the ensuing three years.
Administrative costs would be $10,000 in FY2023.
Memorandum
The stated purpose of this bill is to provide new graduates of an in-state or out-of-state higher education institution, community or technical college, or trade school, up to a $50,000 tax modification to the income tax of the graduate for up to four taxable years; provide rule-making authority to the Tax Commissioner; and remove expired language from this section.
The language of the bill is vague in its intent with the placement in the section of the Code providing for tax credits, not decreasing modifications. The title for the proposed new subsection is “new graduate tax credit” but the provisions describe a modification to income, not a tax credit. If the intent of the bill is to establish a credit of up to $50,000, the bill needs to establish whether it is refundable or not. If it is a credit, the bill should not use the term “modification.” If the bill’s intent is to establish a decreasing modification of up to $50,000, it would be more appropriately placed with other decreasing modifications in 11-21-12(c).
The bill’s language is unclear about whether the $50,000 limitation is the total modification or credit allowed over a period of four years or whether the limitation is for each tax year, for a potential total modification or credit of $200,000. The “in any given tax year” language appears to indicate that the $50,000 limitation applies on a per year basis.
Definitions would be helpful to prevent abuse, and there are no parameters or limits on the $50,000 of “earned” income.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov