Each state does the collection and re mitts the Fed their share. Since all but a few states already have retail sales taxes in place, their is no massive new bureaucracy necessaryReally?
Statement of Billy Hamilton, Deputy Comptroller,
Office of the Texas Comptroller of Public Accounts,
on behalf of Honorable Carole Keeton Rylander, Texas State Comptroller of Public Accounts
Testimony Before the House Committee on Ways and Means
Hearing on Fundamental Tax Reform
April 11, 2000
My name is Billy Hamilton, and I am the Deputy Comptroller for the State of Texas. Carole Keeton Rylander, the Texas Comptroller of Public Accounts, was delighted to receive an invitation to testify before this committee regarding the Fundamental Tax Reform measures under consideration today. Unfortunately, Comptroller Rylander's schedule did not permit her attendance, and she has asked me to testify here on her behalf.
My comments today are directed only to the feasibility of state administration of the Fair Tax proposed by H.R. 2525. I do not intend to comment on the economics or any other aspects of the proposal.
The Texas Comptroller's office has administered a sales and use tax since the 1960's, and I have been involved with administration of the tax since 1982. Last year, the Texas Comptroller collected $13 billion in sales tax revenue from more than 600,000 businesses. I offer my own experience with sales tax administration, as well as the size of Texas' sales tax program, as the basis of my qualification to speak to you about the administerability of H.R. 2525.
As you know, H.R. 2525 would permit states to collect and administer the Fair Tax on behalf of the federal government. In my opinion, Texas would be well-equipped to administer the Fair Tax based on our experience in administering our own sales tax. Even though the base, rate and other characteristics of the Fair Tax are significantly different from the Texas sales tax, it would be feasible for our office to collect the Fair Tax by expanding and enhancing the systems we currently have in place. For example, we would:
· Expand our current system for registering Texas retailers to include registration of sellers under the Fair Tax (615,000 businesses are currently registered as sellers in Texas; under the Fair Tax, 1.5 million Texas businesses would have to be registered);
· Expand our taxpayer assistance efforts to respond to a larger volume of telephone, letter and e-mail inquiries from sellers who collect the Fair Tax and individuals who pay it;
· Expand our Revenue Processing Division to process more returns and tax payments on a more frequent basis and to remit tax collections to the federal government on an almost-daily basis;
· Expand our current audit team and train all auditors to examine businesses for both the Fair Tax and the Texas sales tax; and
· Expand our information technology systems to collect and maintain the computerized records critical to effective administration of a consumption tax like the Fair Tax.
The expansion of our systems to administer the Fair Tax, in the manner I've just described, would be sizable. Under the Fair Tax, we would serve approximately 900,000 more filers than we do currently. We estimate that serving that many additional taxpayers would require 1,100 to 1,600 more full-time employees. The Texas Comptroller currently employs about 2,700 people on a full-time basis.
In spite of this large expansion, the compensation for collecting the Fair Tax that would be provided to states under H.R. 2525 would likely cover our projected costs. As a first approximation, we estimate that the cost to the Texas Comptroller's office for collecting the Fair Tax at full implementation would be $100 to $150 million per year. I emphasize, however, that there would be significant costs to begin collection, including the cost of facilities to house the additional processing facilities, the capital costs of information technology and revenue processing equipment, and the costs of notifying, registering and educating taxpayers on the new tax.
In closing, I believe that if the Fair Tax is to become a reality, the U.S. government would be well-served to make use of the existing expertise of the states. Many states have administered consumption taxes since the 1930s and have developed particular capabilities in this area. We also have extensive experience in dealing with the affected businesses. As long as the administrative fee paid to the state is adequate in relation to the costs of collection, I see no reason that the State of Texas could not effectively administer the Fair Tax.
Any insight on where all the money will come from for the states to "expand" their services, train new emoployees as well as new infrastructure before one dime of Fairtax is collected...Times 50
Don't forget, all those evil IRS employees won't be fired on day one, in fact not for several years after (if ever) either.
The infrastructure is in place. Today, most states have an income tax; the feds do much of the bookkeeping. Abolish the IRS, and there's your pool of bean-counters -- they will go to work for the states, which will then assume their salaries.
In the short term, there will be a hit for the states. I would assume that the states subtract a cut for their overhead before remitting to DC -- but I haven't drilled down tat far into the nuts and bolts.
Bottom line, I expect some long-term savings from the Fair Tax, but nothing dramatic. There will still need to be tax collectors. The Fair Tax will shift the burden - and the power that comes with it -- from the federal government to the states. It will cost somewhat less, because it's more efficient -- instead of monitoring every worker, the government would only need to monitor every retailer.
If you're a small business owner, selling new goods on eBay or in a flea market stall or from a card table on the sidewalk, you're free not to register as a retailer -- you're not collecting tax on your sales, but it's all good, because you paid the tax when you bought the goods. If you prefer, you can register, get a tax ID number, pay no tax on goods for resale, and then collect the tax when you make the retail sale. Pretty much how it works at the state level now.
Under the Fair Tax bill as proposed, I believe the states would be allowed to retain 1/4 percent (of 23%) of the Fair Tax collection as an administrative fee. That sure sounds like way more than enough to pay for an upgrade to the state of Texas' computer system that would be necessary. Since they already collect sales taxes from exactly the same sources, it's a mear change in precentage, not in scope.
Meanwhile, we would be able to close down IRS collection and processing offices from Boston to San Diego, have nice going away parties for departing H & R Block employees, and make April 15 just another day.
I don't see a problem there.