Increase the Motor Fuels Enforcement Fee from 1 Percent to 2 Percent

v The state should increase the motor fuels enforcement fee from 1 percent to 2 percent. (This would affect the allocation of the tax and would not affect taxpayers.)


Background
According to current law, before any other allocation of motor fuel taxes can be made, 1 percent of the gross amount of the taxes shall be deposited in the State Treasury in a special account. The monies in this account are to be used by the Comptroller in the administration and enforcement of the motor fuels tax. This proposal would increase this fee to 2 percent.


Recommendation
The state should raise the enforcement fee from 1 percent to 2 percent.

This change affects the internal allocation and motor fuel tax collections within state government. It would not impact taxpayers in any way.


Implications
Increasing the enforcement fee would increase dedicated revenues for the Comptroller s office, and thus reduce the need for general revenue funding. Thi s would free up resources for other uses. In addition, the increase would allow the Comptroller to redirect more auditors and enforcement personnel into the collection of the motor fuels tax and reduce motor fuels tax evasion. This, in turn, would increase estimate motor fuel collections in the upcoming biennium.

Since this allocation comes before all others, there would be a ripple effect throughout all the funds which receive allocations from the motor fuels tax. The largest reduction would be in the Hig hway Fund since approximately 75 percent of the motor fuels tax flows into this fund. However, the reduction would be offset by the increased collections, and by the fourth year after implementation the impact on the Highway Fund would be positive.


Fiscal Impact
This estimate assumes that the proposed increase in the enforcement fee would generate additional motor fuels tax revenue due to less fraud and more efficient collections. The increase is estimated at approximately $24 million in the 1994-95 bien nium and $45 million in the next biennium. The estimate assumes a September 1, 1993 effective date.

Gain/(Loss) to Gain/(Loss) to Gain to Net
Fiscal the Available the State Comptroller Certification Change in
Year School Fund 002 Highway Fund 006 Operating Account Gain FTEs

1994 $(3,215,000) $(9,645,000) $20,860,000 $17,645,000 0
1995 (1,393,000) (4,179,000) 21,572,000 20,179,000 0
1996 (441,000) (1,325,000) 21,766,000 21,325,000 0
1997 399,000 1,197,000 22,404,000 22,803,000 0
1998 1,212,000 4,206,000 22,582,000 23,794,000 0