LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 76th Regular Session May 11, 1999 TO: Honorable Bill Ratliff, Chair, Senate Committee on Finance FROM: John Keel, Director, Legislative Budget Board IN RE: HB2372 by Gutierrez (relating to exempting certain drugs, medicines, and medical devices from the sales tax), As Engrossed ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Fundsfor * * HB2372, As Engrossed: a negative impact of $(255,286,000) through * * the biennium ending August 31, 2001, if the effective date is July * * 1, 1999; and a negative impact of $(225,921,000) through the * * biennium ending August 31, 2001, if the effective date is October * * 1, 1999. * ************************************************************************** The following table assumes an effective date of July 1, 1999. All Funds, Five-Year Impact: *************************************************************************** *Fiscal Probable Probable Probable Probable * * Year Revenue Revenue Revenue Revenue * * Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to * * General Revenue Cities Transit Counties/SPDs * * Fund Authorities * * 0001 * * 1999 $(9,471,000) $0 $0 $0 * * 2000 (119,362,000) (20,819,000) (8,175,000) (2,521,000) * * 2001 (126,453,000) (22,056,000) (8,661,000) (2,671,000) * * 2002 (134,295,000) (23,424,000) (9,198,000) (2,836,000) * * 2003 (142,499,000) (24,855,000) (9,760,000) (3,010,000) * * 2004 (150,966,000) (26,331,000) (10,340,000) (3,188,000) * *************************************************************************** The following table assumes an effective date of October 1, 1999. *************************************************************************** *Fiscal Probable Probable Probable Probable * * Year Revenue Revenue Revenue Revenue * * Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to Gain/(Loss) to * * General Revenue Cities Transit Counties/SPDs * * Fund Authorities * * 0001 * * 2000 $(99,468,000) $(15,614,000) $(6,131,000) $(1,891,000) * * 2001 (126,453,000) (22,056,000) (8,661,000) (2,671,000) * * 2002 (134,295,000) (23,424,000) (9,198,000) (2,836,000) * * 2003 (142,499,000) (24,855,000) (9,760,000) (3,010,000) * * 2004 (150,966,000) (26,331,000) (10,340,000) (3,188,000) * *************************************************************************** Fiscal Analysis The bill would amend the Tax Code to exempt certain non-prescription drugs and blood glucose monitoring test strips from the sales tax. The governing body of a local taxing authority that imposes a local sales and use tax could repeal the proposed exemption under certain circumstances. Methodology Texas-specific non-prescription drug sales data were obtained from the U.S. Census Bureau. The data were multiplied by the state sales tax rate and extrapolated through fiscal 2004. The fiscal impact is based on the assumption that no local taxing authorities would repeal the exemption. To the extent that one or more would repeal the exemption, the negative fiscal effects would be reduced. Local Government Impact Local units of government would have a corresponding fiscal impact from sales tax revenues, as indicated in the tables above. Source Agencies: LBB Staff: JK, BB, SM