INCOME TAX RATE INCREASE

House Bill 5194 as enrolled

Public Act 94 of 2007

Sponsor:  Rep. Steve Tobocman

House Committee:  Tax Policy (Discharged from Committee)

Senate Committee:  None (Placed on General Orders)

Complete to 10-5-07

A SUMMARY OF HOUSE BILL 5194 AS ENROLLED

The bill amended the Income Tax Act to:

o                   Raise the income tax rate from 3.9 percent to 4.35 percent as of October 1, 2007.

o                   Beginning October 1, 2011, reduce the tax rate by 0.1 each year until the rate reaches 3.95 percent.  (Rate changes would take effect each October 1.)

o                   Establish the rate at 3.9 percent on and after October 1, 2015.

o                   Grant an additional exemption of $250, for tax years after 2007, for qualified disabled veterans and their dependents.  When a dependent files an annual return, the taxpayer or the dependent, but not both, can claim the additional exemption.   (A qualified disabled veteran would be a veteran with a service-connected disability incurred or aggravated in the line of duty in the active military, naval, or air service.)

o                   Appropriate $100,000 for the 2006-07 fiscal year to the Department of Treasury for implementation of the bill's provisions.  (Any amounts not spent in that fiscal year would carry forward in a work project account for the following state fiscal years and not lapse to the General Fund.)

FISCAL IMPACT:

This bill would increase income tax revenue by an estimated $744.3 million in FY 2007-08 and $826.0 million in FY 2008-09.  Since the School Aid Fund is held harmless from rate changes, the entire fiscal impact would affect General Fund/General Purpose revenue.

                                                                                           Legislative Analyst:   Chris Couch 

                                                                                                  Fiscal Analyst:   Rebecca Ross

                                                                                                                           Jim Stansell

■ This analysis was prepared by nonpartisan House staff for use by House members in their deliberations, and does not constitute an official statement of legislative intent.