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F I S C A L I M P A C T R E P O R T
SPONSOR Fox-Young
ORIGINAL DATE
LAST UPDATED
1/25/06
HB 85
SHORT TITLE Reduce Certain Income Tax Rates
SB
ANALYST Francis
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY06
FY07
FY08
(29,700.0)
(60,130.0)
(30,400.0) Recurring General Fund
(Parenthesis ( ) Indicate Expenditure Decreases)
SOURCES OF INFORMATION
LFC Files
Taxation and Revenue Department (TRD)
Responses Received From
Taxation and Revenue Department (TRD)
SUMMARY
Synopsis of Bill
House Bill 85 accelerates the phase-in of the personal income tax rates started in 2003 so that the
top income bracket rate is 4.9 percent starting in tax year 2006 rather than tax year 2008 as is the
case in current law. This changes two years of income tax rates as Table 1 shows:
pg_0002
House Bill 85 Page 2
Table 1: Personal Income Tax Rates By Income Bracket
Married Filing Jointly,
Surviving Spouses,
Head of Household
Married Filing
Separate
Single
2006 2007 2008
Current Law
<8000
<4000
<5500
1.7%
1.7%
1.7%
8000-16000
4000-8000
5500-11000
3.2%
3.2%
3.2%
16000-24000
8000-12000 11000-16000
4.7%
4.7%
4.7%
24,000 +
12,000 +
16,000 +
5.3%
5.3%
4.9%
HB85
<8000
<4000
<5500
1.7%
1.7%
1.7%
8000-16000
4000-8000
5500-11000
3.2%
3.2%
3.2%
16000-24000
8000-12000 11000-16000
4.7%
4.7%
4.7%
24,000 +
12,000 +
16,000 +
4.9%
4.9%
4.9%
Taxable Income Brackets
FISCAL IMPLICATIONS
The fiscal impact of HB 85 is to reduce personal income tax collections by $60.1 million in tax
year 2006 and $60.8 million in 2007. Assuming tax years are spread evenly over fiscal years,
there will be a FY06 impact of $29.7 million. The FY07 impact will be $60.1. FY08 is assumed
to be the $60.8 million, accounting for natural increases in personal income.
SIGNIFICANT ISSUES
The benefits of the remaining years of the phase-in and hence the tax relief in HB 85 accrue only
to those tax filers subject to the highest bracket as indicated in Table 1 or 34 percent of tax filers.
WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL
The personal income tax rate for the top income bracket is already scheduled to come down to
4.9 percent in 2008,
NF/yr:nt