Texas Comptroller Case Study

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Sales tax is income elastic; because of this fact, consumers have a higher tax incidence and carry the burden. From this, it has been evidenced that the tax burden is vertically unequitable and can be seen as unfair to the less fortunate. Sales tax is paid by retailers, which is dependent upon their sales revenue. However, since the demand of consumers is inelastic and can vary based on market and economic conditions, this burden is felt more by lower income individuals and families. However, it is important to note that the tax burden is independent of who physically pays the tax. For example, if demand is more inelastic than supply, consumers will carry the burden of the taxes; this is the current case with sales tax. According to research …show more content…

The funds that the Texas Comptroller collects amounts to over $100 million, with local government carrying the burden by contributing $80 million (How Cities Work 4). Interestingly, Texas Municipal League initiated a study in 2008 to determine how much of the two-percent of funds that the Texas Comptroller collects is actually utilized for administration, enforcement, and reporting. A committee from TML determined that approximately $28 million was used to cover costs, while they ultimately collect over $50 million in profits (4). While this revelation is startling, it is also important to determine how administrative costs are calculated, as this can affect the true value of costs. Some scholars measure administrative costs as the monetary value of time spent on tasks, while some measure the administration and collection of funds as cost per dollar or revenue collected. Simply put, the lower the cost per dollar, the more efficient the agency is in regards to collection costs (Tuerck 7). From these two assumptions can be made: one, the Texas Comptroller’s office is extremely efficient in term of administrative costs and secondly, because of this, the State could potentially consider remitting more funds back to local governments, rather than retaining a higher collection fee. Local governments aren’t the only entities that see a high cost when handling sales taxes. Individuals and businesses also bear a cost through the time and cost that it takes to fill and pay taxes on a monthly and annual basis. While the scholars have varying costs as to the cost of filing taxes, the average cost varies between $85 billion to $100 billion a year (Tuerck 7). Revenue Policies on Economic

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