NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature. The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.
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| SPONSOR: | Burpo | DATE TYPED: | 02/17/01 | HB | 235 | ||
| SHORT TITLE: | Reduce Income Tax Rates | SB | |||||
| ANALYST: | Williams | ||||||
| Subsequent
Years Impact |
Recurring
or Non-Rec |
Fund
Affected | ||
| FY01 | FY02 | |||
| $ (72,500.0) | $ (72,100.0) | Recurring | General Fund | |
*Agency analysis not received.
(Parenthesis ( ) Indicate Revenue Decreases)
SOURCES OF INFORMATION
LFC Files
Taxation and Revenue Department
SUMMARY
Synopsis of Bill
The bill authorizes a reduction in personal income taxes and is consistent with the proposal endorsed by the Governor. The attached table summarizes the package.
The bill creates a zero bracket amount which would result in qualifying taxpayers avoiding filing. Zero bracket proposals typically impact lower income tax payers, while reducing general fund revenue on a recurring basis. TRD estimates 65,000 returns would be dropped from liability from this tax package.
Tax rates would then be adjusted as follows: 2.0%, 3.0%, 4.5%, 6.0%, 7.1% and 7.7%,
compared to the current: 1.7%, 3.2%, 4.7%, 6.0%, 7.1%, 7.9% and 8.2%. Note that the top rate drops by 0.5%. Rate cut proposals also reduce general fund revenue on a recurring basis.
A proposed bracket change just tracks current law, after updating for the proposed rate changes.
TRD notes the proposal is designed to try to reduce marriage tax penalty impacts. The bill is applicable beginning tax year 2001.
Tables provided from the Taxation and Revenue fiscal impact report are attached to provide a basis for comparing current and proposed income brackets and tax rates.
FISCAL IMPLICATIONS
TRD has estimated that the proposed changes would decrease general fund revenues by $72,500.0 million in FY02 and by $72.1 million in FY03. TRD's estimate of the distribution of tax relief by income class is shown on the attached table.
ADMINISTRATIVE IMPLICATIONS
TRD reports that it can absorb the proposed changes within existing resources.
DISTRIBUTION OF TAX REDUCTIONS
The TRD FIR provides information as to the distributional changes implied by the proposed tax cuts. The overall reductions by income groups, tax relief by group, share of taxpayers in each group and each group's share of tax relief are summarized in the attached table.
AW/ar