The following is an excerpt (with dates changed) from Against the Grain , a seri
ID: 2787911 • Letter: T
Question
The following is an excerpt (with dates changed) from Against the Grain, a series of recommendations by the State Comptroller of Texas on how to “save” $4.5 billion and thereby balance the state’s budget:
Require an Annual August Remittance of One-Half of August’s Sales Tax Collections by Monthly Taxpayers. The Legislature should require sales taxpayers to remit half of August’s collections during that month.
Background
Currently, sales tax payments are remitted either monthly, quarterly, or annually. They also may be prepaid either on a quarterly or on a monthly basis.
Monthly taxpayers, including those who collect taxes on their own purchase or use of taxable items, are required by law to remit to the state all tax collections—less any applicable discounts—by the twentieth day of the month following the end of each calendar month. The state’s fiscal year ends on August 31.
Recommendation
The Legislature should require all monthly taxpayers to remit one-half of each August’s sales tax collections during that month.
Specifically, sales taxes collected between August 1 and August 15 would be due with their regular August 20th payment. Monthly taxpayers would remit tax in the usual manner during all other months.
This is not a prepayment plan, but a speeding up of the remittance of actual taxes collected and owed to the state. This would impose an additional burden and would reduce taxpayer cash flow, but should be considered as preferable to a tax increase.
Implications
An annual payment by monthly filers of taxes actually collected during the first 15 days of August would increase August’s collections and decrease September’s collections. Although the initial imposition of this proposal might temporarily inconvenience some taxpayers, the prompt payment to the state of some of its sales tax revenues—collected, but not yet remitted—will enhance the revenue stream at a critical time each fiscal year. During the first year of implementation, all months would have normal collection patterns except August, which would be larger than usual, thereby producing a fiscal gain.
Each following year would see smaller than normal (current) collections in September and larger collections in August. These differences would essentially offset each other. It is important to stress that failure to speed up collections each year after implementation would cause a fiscal loss. The gain to the general fund in the year of implementation would be $215 million.
Fiscal Year Gain to the General Revenue Fund
2016 $215,113,000
2017 $ 0
2018 $ 0
2019 $ 0
2020 $ 0
1a. On what basis does the state probably prepare its appropriation budget? Explain.
Explanation / Answer
1. A. The state's financial plan is probably going to be on a money premise – at any rate concerning the business assess accumulation. On the off chance that business duties were on accumulation premise, there would be no effect of specialist's suggestion.
B. The state is in an ideal situation in monetary substance just to irrelevant degree. By gathering ahead of time, it will utilize $215 million for around 30 days more than it ought to be. On the off chance that the getting rate were 5%, then finances an incentive for the period would be around $896,000. It might be in an ideal situation it change empower to maintain a strategic distance from the negative outcomes of different financial measures, for example, increment in duty, decrease in administrations or infringement of spending laws.
2. The representative is right. The reserve funds can be moved over consistently the length of the accelerate strategy stays dynamic. It is contrasted with loan got from a business to individual and reimburse with another loan each month. A cost is paid by somebody when the traders who might have utilize the money. Whatever is picked up is lost by them.
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