NOTE: As provided in LFC policy, this report is
intended only for use by the standing finance committees of the
legislature. The Legislative Finance Committee does not assume
responsibility for the accuracy of the information in this report when used for
other purposes.
The most recent FIR
version (in HTML & Adobe PDF formats) is available on the Legislative
Website. The Adobe PDF version includes
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LFC in Suite 101 of the State Capitol Building North.
|
SPONSOR: |
Aragon |
DATE TYPED: |
2/7/03 |
HB |
|
||
|
SHORT TITLE: |
Enhanced & Expanded Tax Collection |
SB |
388/aSFC |
||||
|
|
ANALYST: |
Hayes, Patel & Smith |
|||||
APPROPRIATION
|
Appropriation
Contained |
Estimated
Additional Impact |
Recurring or
Non-Rec |
Fund Affected |
||
|
FY03 |
FY04 |
FY03 |
FY04 |
|
|
|
|
5,000.0 |
|
|
Non-Recurring |
General
Fund |
|
|
|
|
|
|
|
(Parenthesis
( ) Indicate Expenditure Decreases)
REVENUE
|
Estimated Revenue |
Subsequent Years Impact |
Recurring or
Non-Rec |
Fund Affected |
|
|
FY03 |
FY04 |
|
|
|
|
|
50,000.0 |
|
Non-Recurring |
General
Fund |
|
|
11,000.0 |
|
Non-Recurring |
Other
State Funds |
|
|
4,000.0-10,000.0
|
|
Recurring |
General
Fund |
|
|
1,500.0-4,000.0 |
|
Recurring |
Other
State Funds |
(Parenthesis ( ) Indicate Revenue Decreases)
Responses
Received From
TRD
SUMMARY
Synopsis
of SFC Amendment
The Senate Finance Amendment clarifies that the
appropriation is also for FY03.
Synopsis
of Original Bill
SB388 appropriates $5 million
from the general fund to the Taxation and Revenue Department for the purpose of
expanding and enhancing tax collection efforts. The appropriation reverts at
the end of FY04.
Significant
Issues
This funds a key Executive initiative.
FISCAL IMPLICATIONS
TRD has made several
impressive presentations on this proposal; a handout from the department’s
presentation to HTRC is attached.
However, TRD has not given any indication of the recurring general fund
impact.
LFC
did a preliminary analysis to determine whether these revenues would be
recurring or non-recurring. The following summary outlines LFC’s analysis:
Since
collections are on outstanding taxes
owed, TRD’s collection initiatives are, by definition, non-recurring. Using TRD’s estimates for collections of
personal income tax, CRS taxes, corporate income tax, special taxes and tape
match program amounts, the non-recurring base equals $52.7 million, of that
amount, approximately $44.5 is general fund, and $8.2 is non-general fund.
The
remainder of the nonrecurring amount and the recurring component is in audit activity. During an audit, the auditor would
typically review three years of tax documents. Using this and TRD’s assumptions
yields $15.5 million to be generated from audits. Of this total, one third (one year or $5.2 million) is assumed to
be recurring. This amount could be further reduced by assuming that a certain
portion of the population will return to noncompliance; LFC “estimate” is that
70 percent of those audited will comply in future years (the LFC did not reduce
the estimate by this factor). Given the preliminary nature of our analysis, we
have ranged the estimate from approximately $6 million to $14 million. Of this
total, roughly $4 million to $10 million is general fund recurring revenue.
TECHNICAL ISSUES
On lines 17 and 18, the appropriation should be
effective for FY03 and FY04.
SUBSTANTIAL ISSUES
It is critical that TRD establish a transparent
methodology to track these revenues.
TRD has stated that the most senior auditors and
collectors will be transferred to this project. More routine duties will be
taken over by junior employees with less experience. However, it must be noted
that a certain amount of “complicated” audits and collections already are in TRD’s
baseline. It is unclear how these audits will be conducted.
MP:SS:CH/njw