Eliminate or Reduce Discounts for Tax Report Filers


The state should eliminate or reduce certain discounts for those who file tax reports for the sales tax, alcoholic beverage excise tax, hotel/motel tax and motor fuels tax.


Background
Current law allows those who file c ertain tax reports to take a deduction against the tax owed to help cover the costs associated with remitting those taxes to the state. In all cases (except motor fuels) the returns must be filed on a timely basis to qualify for the discount.

Texas currently allows filer discounts on the following taxes at the indicated rates:
Sales tax (0.5%)
Alcoholic beverage excise tax (2.0%)
Hotel/motel tax (1.0%)
Motor fuels tax (0.5-2.0%)

A state-by-state co mparison shows that 31 other states reimburse filers of sales tax returns. Texas and 12 other states provide alcohol excise tax discounts. Some states, including California and New York, do not allow any collection discounts.

Given the current fiscal constraints, eliminating or reducing the filer discount is recommended as preferable to a general tax increase.


Recommendation
The state should eliminate the filer discounts on:
Sales tax
Alcoholic beverage excise tax
Hotel/motel tax
Motor fuels tax

An alternative recommendation would be to reduce all discounts to a flat rate 0.5 percent on alcoholic beverage excise tax, hotel/motel tax and motor fuels tax. In addition, the requirement that the motor fuels tax be filed timely to qualify for the exempt ion should be added. The discount on sales tax is currently 0.5 percent.

The effective date should be October 1, 1993, for either elimination or reduction of the discount.


Implications
Initially, eliminating or reducing discounts may temporarily inconvenience taxpayers, but the gain in revenue is important given the current fiscal condition of the state.


Fiscal Impact
Eliminating the timely filer discount or reducing the discount to a flat rate of 0.5 percent would have a positive effect on the state s cash flow. There would be negligible administrative costs.

Discount Elimination

Gain to the Gain to the Gain to the
Fiscal General Revenue Available School State Highway
Year Fund 001 Fund 002 Fund 006

1994 $39,435,000 $ 9,414,000 $28,023,000
1995 45,126,000 10,473,000 31,177,000
1996 47,521,000 10,573,000 31,364,000
1997 50,228,000 10,695,000 31,834,000
1998 53,193,000 10,856,000 32,311,000


Gain to the Gain to the
Fiscal Comptroller Operating Foundation School Certification Change in
Year Account Fund 193 Gain FTEs

1994 $389,000 $550,000 $49,788.000 0
1995 430,000 656,000 56,685.000 0
1996 434,000 656,000 59,184,000 0
1997 441,000 657,000 62,021,000 0
1998 448,000 658,000 65,155,000 0



Uniform 0.5 Percent Discount

Gain to the Gain to the Gain to the
Fiscal General Revenue Available School State Highway
Year Fund 001 Fund 002 Fund 006

1994 $2,059,000 $6,707,000 $19,966,000
1995 2,419,000 7,462,000 22,214,000
1996 2,472,000 7,508,000 22,347,000
1997 2,528,000 7,620,000 22,682,000
1998 2,587,000 7,735,000 23,022,000


Gain to the Gain to the
Fiscal Comptroller Operating Foundation School Certification Change in
Year Account Fund 193 Gain FTEs

1994 $277,000 $413,000 $ 9,456,000 0
1995 306,000 492,000 10,679,000 0
1996 309,000 492,000 10,781,000 0
1997 314,000 493,000 10,955,000 0
1998 319,000 494,000 11,135,000 0