Committee Considers $27 Million Per Year Tax Cut
The Senate Committee on Public Health, Human Services, and Revenue held a public hearing today on a bill (SB 160) that would reduce state tax collections by an estimated $27 million per year, starting with tax year 2012. The tax cut would result from making state income tax treatment of capital losses on investments consistent with federal law. The bill is authored by Senator Kedzie, co-authored by Rep. Ott, and there are seven co-sponsors.
Under current state law, the maximum amount of net losses (after comparing gains and losses from various investments) that may be deducted from income each year is $500, whereas the federal limit is $3,000. Net losses that exceed the state or federal cap may be carried forward and used as offsets against capital gains in future years (or deducted against other income, up to the level of the cap). Beginning on January 1, 2012, SB 160 would “federalize” the state cap on capital losses by raising it to $3,000.
Senator Kedzie was the only person who testified at the hearing, which was just scheduled a few days ago. In light of the bill’s significant price tag (see the DOR fiscal estimate), I’ll be somewhat surprised if it advances very far through the legislative process, but sometimes the Legislature addresses that hurdle by delaying or phasing in a tax cut and pushing all or most of the cost into future fiscal years. We’ll provide updates on the bill if it is approved by the Senate Committee that held today’s hearing.