Colorado Legislative Council Staff
STATE
REVISED FISCAL IMPACT
(replaces fiscal impact dated January 16, 1999)
Drafting Number: Prime Sponsor(s): |
LLS 99-0006 Rep. McElhany Sen. Arnold |
Date: Bill Status: Fiscal Analyst |
February 11, 1999 House Appropriations Harry Zeid (303 866-4753) |
TITLE: CONCERNING THE ELIMINATION OF THE STATE INCOME TAX MARRIAGE PENALTY.
Fiscal Impact Summary |
FY 1999/2000 |
FY 2000/2001 |
State Revenues General Fund |
-$10,123,557 |
-$20,568,144 |
State Expenditures General Fund |
|
$67,290 |
FTE Position Change |
0.0 FTE |
0.0 FTE |
Other State Impact: TABOR Impact |
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Effective Date: 90 days after adjournment; effective for income tax years beginning on or after January 1, 2000. |
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Appropriation Summary for FY 1999-2000: None |
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Local Government Impact: None |
Summary of Legislation
This fiscal note has been revised to reflect updated information. This bill is designed to eliminate the state income tax “marriage penalty” for income tax years beginning on or after January 1, 2000:
• for taxpayers claiming the basic standard deduction on a joint federal income tax return, the bill reduces Colorado taxable income by the difference between an amount equal to twice the federal basic standard deduction for an individual who is not the head of a household and the amount of the federal basic standard deduction for joint filers; and
• for taxpayers claiming itemized deductions on a joint federal income tax return, the bill reduces Colorado taxable income by the difference between an amount equal to twice the federal basic standard deduction for an individual who is not the head of a household and the amount of the itemized deductions claimed.
Since the bill is effective for income tax years beginning on or after January 1, 2000, there is a six-month state General Fund revenue reduction impact in FY 1999-00 on an accrual accounting basis. State expenditures will occur beginning in FY 2000-01.
State Revenues
Elimination of the state income tax “marriage penalty” for income tax years beginning on or after January 1, 2000, will reduce state income tax collections. The reduction in state General Fund revenues on an accrual accounting basis is projected to be $10,123,557 in FY 1999-00, and $20,568,144 in FY 2000-01. A total of 370,216 full-year income tax returns are projected to be affected by the income modification in FY 1999-00.
State Expenditures
The bill will require a new modification line on the income tax return to record the information. In order to track the information provided regarding the amount of interest, dividends, and capital gains claimed as an income modification, the department estimates the need for 900 hours of computer programming time to make the necessary changes to the current income tax system models. At the rate of $68 per hour, the Information Technology Division will require an additional General Fund expenditure of $61,200 in FY 2000-01 to make these changes. The time necessary for the Tax Audit and Compliance Division to modify their audit programs will be absorbed within existing resources.
The Cash and Document Processing Division will experience an increased workload to data capture the information on the income tax return about the income modification. Based on 370,216 returns with additional information, it is projected that $6,090 in additional General Fund expenditures will be necessary annually beginning in FY 2000-01.
The bill will not require a state expenditure in FY 1999-00. Total state General Fund expenditures in FY 2000-01 are estimated to be $67,290.
Other State Impacts
The reduced state revenues will mean a reduction of the amount of state funds required to be refunded to taxpayers under the terms of TABOR, and less state funds will be available for capital construction needs. Table 1 summarizes the net impact of this bill on these state obligations. The changes in Table 1 are changes from a base that includes continuing capital construction projects. A reduction in the state income tax liability will also increase federal income taxes paid by Colorado taxpayers.
Table 1. Additional Impact of HB 99-1003 (millions of dollars)
|
FY 1999-00 |
FY 2000-01 |
General Fund Revenue |
-$10.12 |
-$20.57 |
General Fund Appropriations SB 97-1 Diversion |
0.00 0.00 |
0.00 0.00 |
Controlled Maintenance Trust Fund Appropriations Excess General Fund Reserve |
0.00 -10.12 |
0.00 -20.57 |
Federal Income Taxes Paid by Colorado Taxpayers Additional Money Available for New Capital or Rebates |
2.04 -21.74 |
4.05 0.00 |
TABOR Refund (from prior year) |
0.00 |
-10.12 |
State Appropriations
The fiscal note implies that no new state appropriations or spending authority are required to implement the provisions of the bill in FY 1999-00.
Departments Contacted
Revenue Legislative Council Staff