FISCAL NOTE

Date Requested: January 09, 2019
Time Requested: 04:40 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1730 Introduced HB2108
CBD Subject: Taxation


FUND(S):

General Revenue Fund

Sources of Revenue:

General Fund

Legislation creates:

Decreases Existing Revenue, Creates New Expense, Decreases 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 low and moderate income workers with a refundable state tax credit based on the federal earned income tax credit. Current law provides for a nonrefundable tax credit based on federal poverty guidelines. The proposed bill would create a West Virginia Earned Income Tax Credit (EITC) equal to 50 percent of the federal credit plus additional credit allowances for taxpayers without children who do not qualify for the federal Earned Income Tax Credit. The EITC would affect Personal Income Tax returns beginning in TY2019. Based on our interpretation, a West Virginia EITC would result in an annual loss to the General Revenue Fund of approximately $219.8 million in FY2020 and $221.6 million for each year thereafter. This estimate considers the elimination of the Low-Income Family Tax Credit in West Virginia Code §11-21-22. Additional costs to the State Tax Department would be $740,000 in FY2020 and $710,000 for each year thereafter. The significant increase in administration cost are due to the purchase of fraud review services to investigate the significant number of taxpayers that would claim the West Virginia Earned Income Tax Credit.  



Fiscal Note Detail


Effect of Proposal Fiscal Year
2019
Increase/Decrease
(use"-")
2020
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 739,200 710,000
Personal Services 0 160,000 160,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 4,200 0
Other 0 575,000 550,000
2. Estimated Total Revenues 0 -219,800,000 -221,600,000


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


The proposed bill would create a West Virginia Earned Income Tax Credit (EITC) equal to 50 percent of the federal credit plus additional credit allowances for taxpayers without children who do not qualify for the federal Earned Income Tax Credit. The EITC would affect Personal Income Tax returns beginning in TY2019. Based on our interpretation, a West Virginia EITC would result in an annual loss to the General Revenue Fund of approximately $219.8 million in FY2020 and $221.6 million for each year thereafter. This estimate considers the elimination of the Low-Income Family Tax Credit in West Virginia Code §11-21-22. Additional costs to the State Tax Department would be $740,000 in FY2020 and $710,000 for each year thereafter. The significant increase in administration cost are due to purchase of fraud review services to investigate the significant number of taxpayers that would claim the West Virginia Earned Income Tax Credit.



Memorandum






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