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| SPONSOR: | Sandel | DATE TYPED: | 02/09/00 | HB | 376 | ||
| SHORT TITLE: | Net Capital Gain Income | SB | |||||
| ANALYST: | Williams | ||||||
| Subsequent
Years Impact |
Recurring
or Non-Rec |
Fund
Affected | ||
| FY00 | FY01 | |||
| $ (18,900.0) | $ (18,300.0) | Recurring | General Fund | |
(Parenthesis ( ) Indicate Revenue Decreases)
Relates to SB 23 which proposes a 100 percent capital gains deduction phased in over a three-year period and SB 153 would eliminate the personal income tax on capital gains.
SOURCES OF INFORMATION
Taxation and Revenue Department (TRD)
SUMMARY
Synopsis of Bill
The bill would increase the net capital gains deduction for state income tax purposes from $1,000 to $3,500. The provisions would be applicable beginning tax year 2000.
FISCAL IMPLICATIONS
TRD estimates potential net revenue loss to the general fund of $18,900.0 in FY01 and $18,300.0 for a full year. This estimate is based on expected realizations of nearly $1.6 billion for tax year 2000. In contrast, last year's legislation was based on the assumption of a capital gains base of $1.2 billion in tax year 1999.
TECHNICAL ISSUES
TRD notes this proposal would exacerbate the marriage tax penalty.
OTHER SUBSTANTIVE ISSUES
The TRD estimate incorporates an estimate for the amount of additional state tax the year after a decrease in state taxes paid. This causes a lower state tax deduction of about 7.9% of taxable income, and a corresponding increase in state and federal income tax. TRD notes the proposal would "write a check" from the state general fund to the federal treasury of about $6.4 million.
DISTRIBUTIONAL ISSUES
TRD estimates 50 percent of the benefit of this proposal will go to taxpayers with taxable income of over $80,000 (approximate household income of $100,000). An estimated 75 percent of the total benefit would go to taxpayers with taxable incomes over $45,000 (approximate household income of $60,000).
AW/njw