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What is proposed, a quarter of one percent? I am not sure too many states will sign on for that.

Strange the Texas Comptroller's office disagrees with your assessment.

House Ways & Means archives 106th Congress:

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 [HR26 currently] 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.