Automatic Income Tax Rate Adjustment Act

Automatic Income Tax Rate Adjustment Act

Summary

The Automatic Income Tax Rate Adjustment Act provides for a biennial reduction in the state adjusted gross income tax rate on residents, nonresidents, and corporation if year-over-year revenue from the adjusted gross income tax exceeds certain amounts. The Budget Agency shall make the determination before July 1 of each even-numbered year and for the rate reduction to take effect in taxable years beginning in the immediately following odd-numbered year.

Model Legislation

Section 1. {Adjustment Rate}

(A) The tax rate of adjusted gross income imposed on residents, nonresidents and corporations is the same rate used for the preceding taxable year unless net adjusted gross income tax revenue collected by the state has increased, as determined under section 2.

(B) If the increase in revenue is at least three and one-tenth percent (3.1%), the tax rate to be used for the taxable year beginning in the immediately following odd-numbered year is the rate after the reduction under this subsection.

(C) If the two (2) year average percentage increase in revenue is:

(1) At least three and one-tenth percent (3.1%) but less than four and two-tenth percent (4.2%), the tax rate is the preceding taxable year’s rate minus one tenth percent (0.1%);

(2) At least four and two-tenths percent ( 4.2%) but less than five and three-tenths percent (5.3%), the tax rate is the preceding taxable year’s rate minus two-tenths percent ( 0.2%); or

(3) At least five and three-tenths (5.3%), the tax rate is the preceding taxable year’s rate minus three- tenths percent (0.3%)

Section 2. {Determining Increase in net adjusted gross income tax revenue}

(A) Before September 1 of each even-numbered year, the Budget Agency shall determine whether an increase in net adjusted gross income tax revenue has occurred using two (2) year average. In making this determination, the following shall be used:

(1) Returns processed during the three (3) calendar years that immediately precede the determination year.

(2) Net adjusted gross income tax revenue collected from all taxpayers under this article on these returns.

(3) Overpayments refunded to taxpayers during these calendar years shall be subtracted.

(4) The best information available to the Budget Agency at the time the determination is made.

(B) Beginning in year {insert year}, the Budget Agency shall compute two (2) year average and determine whether an increase has occurred and, if so, the amount of the two (2) year average percentage increase in revenue. The Budget Agency shall certify the results of the computation to the department of state revenue.

Section 3. {Severability clause.}

Section 4. {Repealer clause.}


Approved by the ALEC Board of Directors on June 3, 2010.

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