Brief(1)
S.B. 6, as amended, would increase the amount of valuation of residential property exempt from the school finance property tax levy from $20,000 to $40,000 for tax year 1998 only. New exemptions of $40,000 for commercial and industrial real property and agricultural improvements would be provided for 1998 only. The residential exemption would return to $20,000 for 1999 and the exemption for commercial and industrial real and agricultural improvements would sunset. The school finance levy also would be reduced from 27 mills to 8.5 mills for the 1998-99 school year and would be set at 27 mills for the 1999-2000 school year.
Individual income tax personal exemptions and standard deductions would be indexed prospectively in all years beginning with tax year 1999. (No change would be made in current law in tax year 1998 with respect to the exemptions and deductions.)
Background
The Senate version of the bill approved during 1997 dealt with property tax refund interest. The House Taxation Committee struck the substance of the Senate bill and inserted all other provisions hereinbefore described.
Based on exemption data supplied by the Department of Revenue, the school finance property tax model developed by the Research Department suggests reductions in local effort of the following amounts: $199.7 million in FY 1999 and $132.0 million in FY 2000.
The fiscal impact of prospective indexation would reduce FY 1999 SGF receipts by $2.6 million ($1.7 million attributable to personal exemptions and $0.9 million to standard deductions). For FY 2000, prospective indexation would reduce receipts by $11.9 million ($7.5 million from personal exemptions and $4.4 million from standard deduction).
The combined FY 1999 impact of both the property and income tax provisions is $202.3 million, and the combined FY 2000 impact is $143.9 million.
Information distributed in Committee indicated that a residential parcel valued at $100,000 would experience a 1998 tax savings relative to current law of $189.75, while a $50,000 residential parcel would experience a savings of $83.38. A $1 million parcel of commercial real estate would see a 1998 savings of $4,710 relative to current law.
1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext-bill.html.