Colorado Legislative Council Staff

STATE

REVISED FISCAL IMPACT

(replaces fiscal impact dated March 4, 1999)

TITLE:            CONCERNING AN INCREASE IN THE AMOUNT OF RETIREMENT INCOME RECEIVED BY PERSONS SIXTY-FIVE YEARS OF AGE OR OLDER THAT MAY BE SUBTRACTED FROM FEDERAL TAXABLE INCOME FOR PURPOSES OF CALCULATING STATE INCOME TAX.

Summary of Legislation

            Under current law, the first $20,000 of income (or portion thereof) received as pensions or annuities by persons 55 years of age or older is exempt from Colorado state income tax. Effective for income tax years commencing on or after January 1, 2000, this bill, as amended in the Senate Finance Committee, increases the amount of pension or annuity income that is exempt from state income tax to $24,000 for individuals who are 65 years of age or older. The $20,000 pension and annuity exclusion would remain unchanged for individuals under 65 years of age. The bill will reduce state General Fund revenues, and is therefore assessed as having a state fiscal impact.

State Revenues

            The bill will increase the pension and annuity exclusion from $20,000 to $24,000 for persons 65 years of age or older. Since the bill is effective for income tax years commencing on or after January 1, 2000, the bill will reduce state income tax liability beginning with the second half of FY 1999-00 on an accrual accounting basis. Based on projections prepared by the Department of Revenue from a 1995 database of state and federal income tax returns (latest available), it is estimated that the bill will reduce state General Fund revenue accordingly:

Table 1. General Fund Revenue Reduction

State Expenditures

            State expenditures will be unaffected by the bill. Changes to the income tax return instruction booklets to accommodate the income modification will be done as part of the annual rewrite.

Other State Impacts

            The reduced state revenues will mean a reduction of the amount of future state funds required to be refunded to taxpayers under the terms of TABOR, and less state funds will be available in the General Fund reserve. 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 state income taxes will also increase federal income taxes paid by Colorado Taxpayers

Table 1. Additional Impact of HB 99-1151 (millions of dollars)

State Appropriations

            The fiscal note implies that no new spending authority or appropriations are required to implement the provisions of the bill.

Departments Contacted

            Revenue          Legislative Council Staff