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SPONSOR: |
Aragon |
DATE
TYPED: |
2/7/03 |
HB |
|
||
SHORT
TITLE: |
Repeal
Gross Receipts Tax Municipal Credit |
SB |
302 |
||||
|
ANALYST: |
Smith |
|||||
REVENUE
Estimated Revenue |
Subsequent Years Impact |
Recurring or
Non-Rec |
Fund Affected |
|
FY03 |
FY04 |
|
|
|
|
125,000.0 |
136,000.0 |
Recurring |
General Fund |
|
0 |
0 |
Recurring |
Local Governments |
|
|
|
|
|
(Parenthesis ( ) Indicate Revenue Decreases)
Responses
Received From
TRD
SUMMARY
Synopsis of Bill
This bill repeals the
section of statute that currently provides taxpayers a credit against the state
gross receipts tax (GRT) to offset municipal GRT liability. The credit depends on the municipal gross
receipts tax rate imposed. If the
municipality has imposed a municipal GRT rate of one-quarter percent (.25%),
the credit is equal to that amount. If the municipal GRT rate is one-half
percent (.5%) or more, the credit is worth one-half percent.
All municipalities in
the state have imposed a municipal GRT of at least .5%. Therefore, the effective state gross
receipts tax rate for all taxpayers reporting within municipal boundaries is
4.5%.*
FISCAL IMPLICATIONS
The fiscal impact is
based on an expected municipal gross receipts tax base of approximately $27.2
billion. All municipalities in the
state have imposed a municipal GRT of at least one-half percent.
OTHER
SUBSTANTIVE ISSUES
TRD makes the following tax policy arguments
·
The
current credit allows municipal governments some “cushion” to impose local
option taxes without placing undue burden on taxpayers. Repealing the credit
for municipal gross receipts tax liability will remove that mitigating factor,
and result in a rate increase of .5% for all municipal taxpayers.
·
The
effective .5% rate increase will lead to gross receipts tax rates in some
municipalities approaching 8%. The
principle on which the gross receipts tax was founded was to couple a broad
base with a low rate. This proposal
represents some erosion of that principle.
·
Repealing
the credit will increase the differential between the total GRT rates imposed
in cities and total rates imposed in unincorporated areas. Repealing the credit may provide some
incentive for taxpayers to locate businesses just outside municipal boundaries
to take advantage of lower rates.
Hence, the municipal credit may serve to limit “urban sprawl” to some
degree.
SS/njw:sb