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.

The LFC is only preparing FIRs on bills referred to the Senate Finance Committee, the Senate Ways and Means Committee, the House Appropriations and Finance Committee and the House Taxation and Revenue Committee. The chief clerks are responsible for preparing and issuing all other bill analyses.

Only the most recent FIR version, excluding attachments, is available on the Intranet. Previously issued FIRs and attachments may be obtained from the LFC office in Room 416 of the State Capitol Building.

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates House Bill 8

SOURCES OF INFORMATION

Taxation and Revenue Department

SUMMARY

Synopsis of Bill

Senate Bill 11 would reduce income tax rates for tax years beginning after January 1, 2000. The proposed rate schedules exempt the first $1,000 to $2,000 of taxable income, depending upon the type of return. Specifically, for taxpayers filing single or married separate returns, the first $1,000 of taxable income would be exempt from state income taxes; for married joint filers, the first $2,000 of taxable income; and for head of household filers, the first $1,500. In addition, the bill would reduce most marginal tax rates. 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 $24.8 million in FY 2000, and by $25.5 million on a tax year basis. The fiscal impact estimate assumes an average reduction of $46 for 549 thousand taxpayers. TRD's estimate of the distribution of tax relief by income class is shown below.

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 groups share of tax relief is summarized in the following table.

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