BILL ANALYSIS AND FISCAL IMPACT REPORT	Page 1 of  6

DATE:  March 7, 2001	Submitted by: TAXATION AND REVENUE DEPT.
	T. GLENN ELLINGTON, SECRETARY
BILL NUMBER: SFC Substitute for SB-124 (Senator Wilson)

SPONSOR: Senate Finance Committee

BILL SHORT TITLE: Personal Income Tax Reduction Package; Adjust Rates and Brackets; Increase LICTR.

DESCRIPTION: By the second year, this personal income tax reduction and restructuring bill includes a decrease in the top marginal rate from 8.2% to 7.8% along with adjustment of the next to top bracket so that the 7.8% rate kicks in for married joint returns at the same $100K as under current law. Lower income taxpayers receive a substantial portion of the total $72 million tax cut through the mechanism of a “zero bracket” deduction which is worth up to $88 for married joint filers. For singles and heads of household, the zero bracket amount is worth up to $44 and $66, respectively. The lowest bracket above the zero bracket is slightly adjusted to ameliorate the notorious marriage tax penalty. The specific design of the zero brackets also helps somewhat in this regard. Other interior rates are dropped by .2%. The overall package drops over 65,000 returns from any liability, while lower income taxpayers receive an average 27% reduction and the top bracket taxpayers receive a 6.5% reduction from current tax levels. The average married taxpayer receives a $184 per family decrease in personal income tax, while singles and heads of household average $66 and $69 respectively. The first year is phased in to cost about half the total package. LICTR is increased by about $4.8 million by treating children the same as elderly, low-income citizens. That is, each dependent child is entitled to 3 exemptions for LICTR purposes. 

 EFFECTIVE DATE: applicable for tax years beginning on or after January 1, 2001.

FISCAL IMPACT (Thousands of dollars):  		Note: Parenthesis ( ) indicate a revenue loss:
		Recurring or		
Estimated Impact on Revenues	Nonrecurring	Funds 	
 FY 2002 	FY 2003	FY 2004   	     Impact     t     	             Affected          .             	
(30,500)	(69,700)	(74,000)	Recurring	General Fund	
	2,400	5,500	Recurring	State Deduction Recovery	
(4,700)	(4,600)	(4,400)	Recurring	LICTR Increase	
(35,200)	(71,900)	(72,900)	Recurring	Net General Fund	
	5,200	11,900	Recurring	Federal Deduction Recovery	
35,200	66,700	61,000	Recurring	Net Taxpayer Benefit	

ADMINISTRATIVE IMPACT: minimal. Forms, tax tables and instructions are generated anew every year.

OTHER IMPACTS AND ISSUES:
1.	 The five-year impact on the general fund, the U.S. Treasury and taxpayers is as follows:
	FY 2002	FY 2003	FY 2004	FY 2005	FY 2006	
Gross General Fund	(30,500)	(69,700)	(74,000)	(77,500)	(81,700)	
State Deduction Recovery		2,400	5,500	5,800	6,100	
LICTR Increase	(4,700)	(4,600)	(4,400)	(4,200)	(4,000)	
Net General Fund	(35,200)	(71,900)	(72,900)	(75,900)	(79,600)	
Federal Deduction Recovery		5,200	11,900	12,600	13,200	
Net Taxpayer Benefit	35,200	66,700	61,000	63,300	66,400	

2.	
2001 Current Law Single Tax Table		TY 2001 Proposed Single	
If Taxable Income is	Then tax		of Amount in 		If Taxable Income is	Then tax		of Amount in 	
over	but not over	Is	Plus	Excess of		Over	but not over	Is	Plus	Excess of	
0	5,500	$0.00	1.7%	0		0	1,500	0.00	0.0%	0	
5,500	11,000	$93.50	3.2%	5,500		1,500	6,000	0.00	2.0%	1,500	
11,000	16,000	$269.50	4.7%	11,000		6,000	11,000	90.00	3.2%	6,000	
16,000	26,000	$504.50	6.0%	16,000		11,000	16,000	250.00	4.7%	11,000	
26,000	42,000	$1,104.50	7.1%	26,000		16,000	26,000	485.00	6.0%	16,000	
42,000	65,000	$2,240.50	7.9%	42,000		26,000	42,000	1,085.00	7.1%	26,000	
65,000	and over  	$4,057.50	8.2%	65,000		42,000	and over  	2,221.00	7.9%	42,000	
			
2001 Current Law Married Joint Tax Table		TY 2001 Proposed MFJ	
If Taxable Income is	Then tax		of Amount in 		     If Taxable Income is	Then tax		of Amount in 	
over	but not over	Is	Plus	Excess of		over	but not over	Is	Plus	Excess of	
0	8,000	$-0.00	1.7%	0		0	3,000	0.00	0.0%	0	
8,000	16,000	$136.00	3.2%	8,000		3,000	10,500	0.00	2.0%	3,000	
16,000	24,000	$392.00	4.7%	16,000		10,500	16,000	150.00	3.2%	10,500	
24,000	40,000	$768.00	6.0%	24,000		16,000	24,000	326.00	4.7%	16,000	
40,000	64,000	$1,728.00	7.1%	40,000		24,000	40,000	702.00	6.0%	24,000	
64,000	100,000	$3,432.00	7.9%	64,000		40,000	64,000	1,662.00	7.1%	40,000	
100,000	and over  	$6,276.00	8.2%	100,000		64,000	and over  	3,366.00	7.9%	64,000	
											
2001 Current Law Head of Household Tax Table		TY 2001 Proposed HH	
If Taxable Income is	Then tax		of Amount in 		If Taxable Income is	Then tax		of Amount in 	
Over	but not over	Is	Plus	Excess of		over	but not over	Is	Plus	Excess of	
0	7,000	$0.00	1.7%	0		0	2,500	0.00	0.0%	0	
7,000	14,000	$119.00	3.2%	7,000		2,500	8,000	0.00	2.0%	2,500	
14,000	20,000	$343.00	4.7%	14,000		8,000	14,000	110.00	3.2%	8,000	
20,000	33,000	$625.00	6.0%	20,000		14,000	20,000	302.00	4.7%	14,000	
33,000	53,000	$1,405.00	7.1%	33,000		20,000	33,000	584.00	6.0%	20,000	
53,000	83,000	$2,825.00	7.9%	53,000		33,000	53,000	1,364.00	7.1%	33,000	
83,000	and over  	$5,195.00	8.2%	83,000		53,000	and over  	2,784.00	7.9%	53,000	

3.	
CY 2001	Current	Proposed	Decline	%	Current	Proposed				
PIT Liability	Taxable	Taxable	Taxable	Decline	Liability	Liability	Decrease	Decrease	Decrease	
	Returns	Returns	Returns	Returns	(Million $)	(Million $)	(Million $)	%	Per Retn.	
Single	229,037	198,372	(30,665)	-13.4%	$230.2	$224.5	($5.8)	-2.5%	($25)	
Married Joint	257,575	248,727	(8,848)	-3.4%	$724.6	$702.1	($22.4)	-3.1%	($87)	
Married Separate	6,725	6,266	(459)	-6.8%	$10.3	$10.0	($0.3)	-3.1%	($48)	
Head of Household	71,079	62,115	(8,964)	-12.6%	$48.6	$45.8	($2.7)	-5.6%	($38)	
  Total	564,416	515,480	(48,936)	-8.7%	$1,013.7	$982.4	($31.3)	-3.1%	($55)	
										
	Current	Proposed	Decline	%	Current	Proposed				
	Number 	Taxable	Taxable	Decline	Liability	Liability	Decrease	Decrease	Decrease	
 Base Taxable	Returns	Returns	Returns	Returns	(Millions)	(Millions)	(Millions $)	%	Per Retn.	
     0 - 15,000	238,985	190,050	(48,935)	-20.5%	$38.2	$31.4	($6.8)	-17.8%	($28)	
15,000 – 25,000	95,577	95,577	0	0.0%	$72.0	$68.0	($4.0)	-5.6%	($42)	
25,000 – 40,000	93,358	93,358	0	0.0%	$143.4	$138.9	($4.5)	-3.2%	($49)	
40,000 – 75,000	90,840	90,840	0	0.0%	$280.8	$275.6	($5.2)	-1.8%	($57)	
Over 75,000	45,656	45,656	0	0.0%	$479.4	$468.6	($10.8)	-2.3%	($236)	
	564,416	515,481	(48,935)	-8.7%	$1,013.7	$982.4	($31.3)	-3.1%	($55)	
										
   Note: marriage tax penalty changes from 	
	$609	(17.6%)	to	$582	(17.0%)					

4.	
Detail										
	Current	Proposed	Decrease	%	Current	Proposed 	Decrease			
2001 Single	Single	Single	Number	Decline	Liability	Liability	$	Decrease	Decrease	
  Base Taxable	Returns	Returns	Returns	Returns	(Millions)	(Millions)	(Millions)	%	Per Retn.	
     0 - 15,000	133,890	103,225	(30,665)	-22.9%	$21.6	$19.2	(2.3)	-10.9%	($17)	
15,000 - 25,000	42,385	42,385	0	0.0%	$35.9	$35.1	(0.8)	-2.3%	($20)	
25,000 - 40,000	29,860	29,860	0	0.0%	$50.6	$50.1	(0.6)	-1.1%	($19)	
40,000 - 75,000	16,523	16,523	0	0.0%	$53.9	$53.5	(0.4)	-0.7%	($22)	
Over 75,000	6,379	6,379	0	0.0%	$68.2	$66.6	(1.7)	-2.4%	($262)	
	229,037	198,372	(30,665)	-13.4%	$230.2	$224.5	(5.8)	-2.5%	($25)	
										
		Proposed	Decrease	%	Current	Proposed 	Decrease			
2001 MFJ	MFJ	MFJ	Number	Decline	Liability	Liability	$	Decrease	Decrease	
  Base Taxable	Returns	Returns	Returns	Returns	(Millions)	(Millions)	(Millions)	%	Per Retn.	
     0 - 15,000	54,392	45,545	(8,847)	-16.3%	$9.5	$6.6	(2.8)	-29.9%	($52)	
15,000 - 25,000	39,999	39,999	0	0.0%	$26.1	$23.5	(2.6)	-10.1%	($66)	
25,000 - 40,000	54,915	54,915	0	0.0%	$79.3	$75.7	(3.6)	-4.6%	($66)	
40,000 - 75,000	70,387	70,387	0	0.0%	$214.7	$210.0	(4.7)	-2.2%	($66)	
Over 75,000	37,882	37,882	0	0.0%	$395.0	$386.3	(8.7)	-2.2%	($230)	
	257,575	248,728	(8,847)	-3.4%	$724.6	$702.1	(22.5)	-3.1%	($87)	
										
		Proposed	Decrease	%	Current	Proposed 	 Decrease			
2001 MFS	MFS	MFS	Number	Decline	Liability	Liability	$	 Decrease	 Decrease	
  Base Taxable	Returns	Returns	Returns	Returns	(Millions)	(Millions)	(Millions)	%	Per Retn.	
     0 - 15,000	3,366	2,907	(459)	-13.6%	$0.8	$0.7	(0.1)	-11.3%	($27)	
15,000 - 25,000	1,481	1,481	0	0.0%	$1.4	$1.4	(0.0)	-2.8%	($27)	
25,000 - 40,000	908	908	0	0.0%	$1.7	$1.6	(0.0)	-1.8%	($33)	
40,000 - 75,000	615	615	0	0.0%	$2.0	$2.0	(0.0)	-1.5%	($49)	
Over 75,000	355	355	0	0.0%	$4.4	$4.3	(0.1)	-2.9%	($366)	
	6,725	6,266	(459)	-6.8%	$10.3	$10.0	(0.3)	-3.1%	($47)	
										
		Proposed	Decrease	%	Current	Proposed 	 Decrease			
2001 H/H	H/H	H/H	Number	Decline	Liability	Liability	$	 Decrease	 Decrease	
  Base Taxable	Returns	Returns	Returns	Returns	(Millions)	(Millions)	(Millions)	%	Per Retn.	
     0 - 15,000	47,337	38,373	(8,964)	-18.9%	$6.4	$4.9	(1.5)	-23.9%	($32)	
15,000 - 25,000	11,712	11,712	0	0.0%	$8.5	$8.0	(0.5)	-5.7%	($41)	
25,000 - 40,000	7,676	7,676	0	0.0%	$11.9	$11.5	(0.3)	-2.6%	($40)	
40,000 - 75,000	3,315	3,315	0	0.0%	$10.2	$10.1	(0.1)	-1.3%	($39)	
Over 75,000	1,040	1,040	0	0.0%	$11.7	$11.4	(0.3)	-2.3%	($260)	
	71,080	62,116	(8,964)	-12.6%	$48.6	$45.9	(2.7)	-5.6%	($38)	

5.	2nd Year
2001 Current Law Single Tax Table		Proposed TY 2002 Single	
If Taxable Income is	Then tax		of Amount in 		If Taxable Income is	Then tax		of Amount in 	
over	but not over	is	Plus	Excess of		over	but not over	is	Plus	Excess of	
0	5,500	$0.00	1.7%	0		0	2,200	$0.00 	0.00%	0	
5,500	11,000	$93.50	3.2%	5,500		2,200	6,000	$0.00 	2.00%	2,200	
11,000	16,000	$269.50	4.7%	11,000		6,000	11,000	$76.00 	3.00%	6,000	
16,000	26,000	$504.50	6.0%	16,000		11,000	16,000	$226.00 	4.50%	11,000	
26,000	42,000	$1,104.50	7.1%	26,000		16,000	26,000	$451.00 	6.00%	16,000	
42,000	65,000	$2,240.50	7.9%	42,000		26,000	65,000	$1,051.00 	7.10%	26,000	
65,000	and over  	$4,057.50	8.2%	65,000		65,000	and over  	$3,820.00 	7.80%	65,000	
			
2001 Current Law Married Joint Tax Table		Proposed TY 2002 MFJ	
If Taxable Income is	Then tax		of Amount in 		If Taxable Income is	Then tax		of Amount in 	
over	but not over	is	Plus	Excess of		over	but not over	is	Plus	Excess of	
0	8,000	$0.00	1.7%	0		0	4,400	$0.00 	0.00%	0	
8,000	16,000	$136.00	3.2%	8,000		4,400	10,200	$0.00 	2.00%	4,400	
16,000	24,000	$392.00	4.7%	16,000		10,200	16,000	$116.00 	3.00%	10,200	
24,000	40,000	$768.00	6.0%	24,000		16,000	24,000	$290.00 	4.50%	16,000	
40,000	64,000	$1,728.00	7.1%	40,000		24,000	40,000	$650.00 	6.00%	24,000	
64,000	100,000	$3,432.00	7.9%	64,000		40,000	100,000	$1,610.00 	7.10%	40,000	
100,000	and over  	$6,276.00	8.2%	100,000		100,000	and over  	$5,870.00 	7.80%	100,000	
											
2001 Current Law Head of Household Tax Table		Proposed TY 2002 HH	
If Taxable Income is	Then tax		of Amount in 		If Taxable Income is	Then tax		of Amount in 	
over	but not over	is	Plus	Excess of		over	but not over	is	Plus	Excess of	
0	7,000	$0.00	1.7%	0		0	3,300	$0.00 	0.00%	0	
7,000	14,000	$119.00	3.2%	7,000		3,300	8,000	$0.00 	2.00%	3,300	
14,000	20,000	$343.00	4.7%	14,000		8,000	14,000	$94.00 	3.00%	8,000	
20,000	33,000	$625.00	6.0%	20,000		14,000	20,000	$274.00 	4.50%	14,000	
33,000	53,000	$1,405.00	7.1%	33,000		20,000	33,000	$544.00 	6.00%	20,000	
53,000	83,000	$2,825.00	7.9%	53,000		33,000	83,000	$1,324.00 	7.10%	33,000	
83,000	and over  	$5,195.00	8.2%	83,000		83,000	and over  	$4,874.00 	7.80%	83,000	

6.	
CY 2002	Current	Proposed	Decline	%	Current	Proposed				
PIT Liability	Taxable	Taxable	Taxable	Decline	2002	2002	Decrease	Decrease	Decrease	
	Returns	Returns	Returns	Returns	(Million $)	(Million $)	(Million $)	%	Per Retn.	
Single	231,856	200,731	-31,125	-13.40%	$248.40 	$233.20 	($15.20)	-6.10%	($66)	
Married Joint	269,998	252,458	-17,540	-6.50%	$779.80 	$730.00 	($49.70)	-6.40%	($184)	
Married Separate	6,826	6,360	-466	-6.80%	$11.10 	$10.40 	($0.70)	-6.40%	($104)	
Head of Household	72,145	54,420	-17,725	-24.60%	$52.60 	$47.70 	($4.90)	-9.40%	($69)	
  Total	580,825	513,969	-66,856	-11.50%	$1,091.90 	$1,021.20 	($70.60)	-6.50%	($122)	
										
	Current	Proposed	Decline	%	Current	Proposed				
CY 2002	Number 	Taxable	Taxable	Decline	Liability	2002	Decrease	Decrease	Decrease	
 Base Taxable	Returns	Returns	Returns	Returns	(Millions)	(Millions)	(Millions $)	%	Per Retn.	
     0 - 15,000	251,129	184,273	-66,856	-26.60%	$41.80 	$30.50 	($11.30)	-27.10%	($45)	
15,000 - 25,000	97,011	97,011	0	0.00%	$78.70 	$70.70 	($7.90)	-10.10%	($82)	
25,000 - 40,000	94,759	94,759	0	0.00%	$155.80 	$146.80 	($8.90)	-5.70%	($94)	
40,000 - 75,000	92,203	92,203	0	0.00%	$303.40 	$289.70 	($13.70)	-4.50%	($149)	
Over 75,000	45,724	45,724	0	0.00%	$512.30 	$483.60 	($28.70)	-5.60%	($629)	
	580,826	513,970	-66,856	-11.50%	$1,091.90 	$1,021.20 	($70.60)	-6.50%	($122)	
										
   Note: marriage tax penalty changes from 	
$610	-17.80%	to	$538	-16.20%						

7.	2nd Year Detail
	Current	Proposed	Decrease	%	Current	Proposed 	Decrease			
TY 2002 SIngle	Single	Single	Number	Decline	Liability	Liability	$	Decrease	Decrease	
  Base Taxable	Returns	Returns	Returns	Returns	(Millions)	(Millions)	(Millions)	%	Per Retn.	
     0 - 15,000	135,899	104,773	-31,126	-22.90%	$23.60 	$19.00 	($4.60)	-19.40%	($34)	
15,000 - 25,000	43,020	43,020	0	0.00%	$39.20 	$36.90 	($2.30)	-5.90%	($53)	
25,000 - 40,000	30,308	30,308	0	0.00%	$54.80 	$53.20 	($1.70)	-3.00%	($55)	
40,000 - 75,000	16,771	16,771	0	0.00%	$58.10 	$55.20 	($2.90)	-5.00%	($172)	
Over 75,000	5,859	5,859	0	0.00%	$72.80 	$69.00 	($3.80)	-5.20%	($650)	
	231,857	200,731	-31,126	-13.40%	$248.40 	$233.20 	($15.20)	-6.10%	($66)	
										
	Current	Proposed	Decrease	%	Current	Proposed 	Decrease			
TY 2002 MFJ	MFJ	MFJ	Number	Decline	Liability	Liability	$	Decrease	Decrease	
  Base Taxable	Returns	Returns	Returns	Returns	(Millions)	(Millions)	(Millions)	%	Per Retn.	
     0 - 15,000	63,767	46,228	-17,539	-27.50%	$10.40 	$6.00 	($4.30)	-41.70%	($68)	
15,000 - 25,000	40,599	40,599	0	0.00%	$28.70 	$24.10 	($4.60)	-16.00%	($113)	
25,000 - 40,000	55,739	55,739	0	0.00%	$86.30 	$79.70 	($6.60)	-7.60%	($118)	
40,000 - 75,000	71,443	71,443	0	0.00%	$232.10 	$221.90 	($10.20)	-4.40%	($143)	
Over 75,000	38,450	38,450	0	0.00%	$422.40 	$398.40 	($24.00)	-5.70%	($625)	
	269,998	252,459	-17,539	-6.50%	$779.80 	$730.00 	($49.70)	-6.40%	($184)	
										
	Current	Proposed	Decrease	%	Current	Proposed 	Decrease			
TY 2002 MFS	MFS	MFS	Number	Decline	Liability	Liability	$	Decrease	Decrease	
  Base Taxable	Returns	Returns	Returns	Returns	(Millions)	(Millions)	(Millions)	%	Per Retn.	
     0 - 15,000	3,416	2,950	-466	-13.60%	$0.90 	$0.70 	($0.20)	-18.40%	($47)	
15,000 - 25,000	1,504	1,504	0	0.00%	$1.60 	$1.50 	($0.10)	-5.80%	($60)	
25,000 - 40,000	922	922	0	0.00%	$1.80 	$1.70 	($0.10)	-4.50%	($87)	
40,000 - 75,000	624	624	0	0.00%	$2.20 	$2.00 	($0.10)	-6.00%	($208)	
Over 75,000	360	360	0	0.00%	$4.70 	$4.50 	($0.20)	-5.30%	($694)	
	6,826	6,360	-466	-6.80%	$11.10 	$10.40 	($0.70)	-6.40%	($104)	
										
	Current	Proposed	Decrease	%	Current	Proposed 	Decrease			
TY 2002 HH	H/H	H/H	Number	Decline	Liability	Liability	$	Decrease	Decrease	
  Base Taxable	Returns	Returns	Returns	Returns	(Millions)	(Millions)	(Millions)	%	Per Retn.	
     0 - 15,000	48,047	30,322	-17,725	-36.90%	$7.00 	$4.70 	($2.20)	-32.10%	($47)	
15,000 - 25,000	11,888	11,888	0	0.00%	$9.30 	$8.30 	($0.90)	-10.30%	($80)	
25,000 - 40,000	7,791	7,791	0	0.00%	$12.90 	$12.30 	($0.60)	-4.90%	($81)	
40,000 - 75,000	3,364	3,364	0	0.00%	$11.00 	$10.60 	($0.40)	-4.10%	($134)	
Over 75,000	1,055	1,055	0	0.00%	$12.50 	$11.80 	($0.70)	-5.50%	($645)	
	72,145	54,420	-17,725	-24.60%	$52.60 	$47.70 	($4.90)	-9.40%	($69)	

5.	Scenarios
	Approx. AGI	Approx. MGI	Approx. Taxable Income	Current LICTR	Proposed LICTR	Current Tax	TY 2001 Proposed Tax	TY 2001 Net Savings	TY 2002 Proposed Tax	TY 2002 Net Savings	
Single -- 25th Percentile	2,800	8,300	(4,150)	(70)	(70)	0	0	0	0	0	
           -- 50th Percentile	10,300	10,300	3,350	(60)	(60)	57	27	30	23	34	
           -- 75th Percentile	24,800	24,800	16,200	0	0	517	493	24	463	54	
Married Joint -- 25th Percentile	20,100	20,300	1,600	(40)	(55)	27	0	42	0	42	
           -- 50th Percentile	40,900	41,100	18,400	0	0	505	425	80	398	107	
           -- 75th Percentile	66,600	66,800	39,300	0	0	1,686	1,606	80	1,568	118	
Head of Household
           -- 25th Percentile	8,700	10,200	(4,400)	(100)	(185)	0	0	85	0	85	
           -- 50th Percentile	12,600	15,600	(500)	(70)	(110)	0	0	40	0	40	
           -- 75th Percentile	22,900	27,900	9,800	0	0	209	158	51	148	61	
6. Detail is not currently available for the LICTR increase. All the benefits, however, go to filers with children. Approximately 65% of the net benefit will go to families and heads of household with 1 child and the balance to families with two or more children. Because of the nature of the tables, the second child generates approximately 67% as much as the first child and the third and subsequent children do not increase LICTR at all.