FISCAL NOTE
Date Requested: January 10, 2020
Time Requested: 04:11 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1029 |
Introduced |
SB223 |
|
|---|
| 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 income of senior citizens from West Virginia personal income tax.
According to our interpretation, the proposed bill would exempt from West Virginia personal income tax all income received by any person who has attained the age of 65 on or before the last day of the taxable year. The exemption does not limit the income to any specific types and it does not require that the taxpayer be a resident of West Virginia. The exemption would be effective for taxable years beginning after December 31, 2019. Senior citizens are currently eligible for an income deduction of up to $8,000. In addition, beginning in Tax Year 2020, Senior citizens, with adjusted gross incomes of $50,000 or less if single or $100,000 or less if married filing joint will be eligible to deduct 35 percent of the taxable social security benefits they receive. This deduction is set to increase to 65 percent of taxable social security benefits in TY2021 and 100 percent in TY2022.
Based on our interpretation, the passage of the proposed legislation would decrease General Revenue Fund collections by $340 million in FY2021. The annual loss to the General Revenue Fund would escalate over time with the increase in the number of senior citizens.
Additional administrative cost incurred by the State Tax Department are expected to be $51,000 in FY2021 and $40,000 in subsequent fiscal years.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2020
Increase/Decrease
(use"-") |
2021
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
51,000 |
40,000 |
| Personal Services |
0 |
40,000 |
40,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
1,000 |
0 |
| Other |
0 |
10,000 |
0 |
| 2. Estimated Total Revenues |
0 |
-340,000,000 |
0 |
Explanation of above estimates (including long-range effect):
According to our interpretation, the proposed bill would exempt from West Virginia personal income tax all income received by any person who has attained the age of 65 on or before the last day of the taxable year. The exemption does not limit the income to any specific types and it does not require that the taxpayer be a resident of West Virginia. The exemption would be effective for taxable years beginning after December 31, 2019. Senior citizens are currently eligible for an income deduction of up to $8,000. In addition, beginning in Tax Year 2020, Senior citizens, with adjusted gross incomes of $50,000 or less if single or $100,000 or less if married filing joint will be eligible to deduct 35 percent of the taxable social security benefits they receive. This deduction is set to increase to 65 percent of taxable social security benefits in TY2021 and 100 percent in TY2022.
Based on our interpretation, the passage of the proposed legislation would decrease General Revenue Fund collections by $340 million in FY2021. The annual loss to the General Revenue Fund would escalate over time with the increase in the number of senior citizens.
Additional administrative cost incurred by the State Tax Department are expected to be $51,000 in FY2021 and $40,000 in subsequent fiscal years.
Memorandum
The stated purpose of this bill is to exempt income of senior citizens from West Virginia personal income tax.
The bill would exempt from West Virginia personal income tax “all income received by any person who has attained the age of 65 on or before the last day of the taxable year,” for tax years beginning after December 31, 2019.
This bill may go beyond the constitutional authority of the legislature under W.Va. Const. Art X, Sec.1, which provides that:
“The Legislature shall have authority to tax privileges, franchises, and incomes of persons and corporations and to classify and graduate the tax on all incomes according to the amount thereof and to exempt from taxation incomes below a minimum to be fixed from time to time, and such revenues as may be derived from such tax may be appropriated as the Legislature may provide.”
The constitutional provision seems to limit the legislature’s authority to setting a minimum, below which incomes may be exempt from income taxation. The proposed bill purports to exempt all incomes, no matter how great, based simply on the age of the recipient.
However, the authority granted the Legislature under the constitution “to classify and graduate the tax on all incomes …” may also be interpreted to justify an age-based exemption.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov