Tax Revenue Analysis Project Tax Term Paper

Excerpt from Term Paper :

Thus, the per capita tax revenue is presented in Table 5.

Table 5: Ratio: Per Capital Tax Revenue ($Million)

New York

Activities

2010

2009

Tax Revenue

$58,039

$55,804

Total Population

19,378,102

19,378,102

Ratio: Per Capital Tax Revenue

$2,995: 1

$2,880: 1

Pennsylvania

Tax Revenue

$28,300

$27,600

Total Population

12,702,379

12,702,379

Ratio: Per Capital Tax Revenue

$2,228:1

$2,173:1

The findings from table 5 reveal that both states record increase in per capital tax revenue at the end of the fiscal years 2009 to 2010. In the New York, the government realizes ratio of $2,880 per person in 2009. However, the par capital tax revenue increased to $2,995 per person in 2010. Thus, the per capita tax revenue is increasing in the New York. Similarly, Pennsylvania recorded ratio of $2,173 per person in 2009 however, the ratio per capital tax revenue increased to $2,228 at the end of the fiscal year 2010.

Answering the Research Question

Overview of the total revenue of the New York reveals the state increased the total revenue from $129 billion in 2009 to $149 billion in 2010 making the state to record the 15% increase in the total revenue. Despite the increase in the revenue, the state total expenses are greater than the revenue at the end of the 2009 fiscal year and at the end of the 2010 fiscal year. "The State's governmental activities had total revenues of $125.9 billion, which were less than total expenses of $126.7 billion, excluding transfers to business-type activities of $2.2 billion, by $760 million" (State of New York 2010, P 19). Basically, the increase in the government expenses at the end of the 2009 and 2010 fiscal years was due to the increase in the unemployment benefits payments. Moreover, the government has the obligation to finance largest programs such as education, public welfare, public health, transportation, public safety and others. Similarly, Pennsylvania also recorded the increase in the total revenue at the end of the 2009 and 2010 fiscal years. The state revenue in 2009 was $61.2 billion. In 2010, the state revenue increased to $73.1 billion which was $11.9 billion increase in the revenue between 2009 and 2010. Likewise the New York, Pennsylvania also recorded higher expenses than revenue. In 2009, the total expenses were $65.9 billion which was higher than $61.2 billion of 2009 total revenue. In 2010, the Pennsylvania also recorded $74.6 billion as total expenses which was higher than the $73.1 billion of 2010 total revenue. Based on the budget deficits recorded by the New York and Pennsylvania, there are strategies that the two governments could employ to increase the revenue in order to balance the budget. One of the strategies to employ is to increase the taxation levied on wealthy people. There are several thousands people who are very rich in both states. The increase in the taxation on the rich will not affect their disposable incomes because of their income levels.

Moreover, the two states should increase taxation on tobacco. In both states, million of people smoke cigarettes. Increase in the taxes on cigarette will not make people to change their smoking habits. Thus, the increase in cigarette taxations will address the problem of government deficits.

Extent the tax meet or the nine criteria of the National Conference of State Legislature

National Conference of States Legislature states that high quality tax system should be complementary rather that contradictory. This means that the revenue system should minimize inconsistence. Based on the tax system of the New York, it is revealed that the tax system is not contradictory. From the financial record of the New York, all the revenue and expenses are listed and very easy to understandable. The only shortcoming of the tax system is that the financial record of New York only reveals that the government realizes revenue through taxation; the government does not provide comprehensive explanation on the amount realized from each category of tax such as income tax, sales tax, and property tax. Additionally, Pennsylvania tax system is also similar to the New York tax system, which does not provide the details of each category of tax in the state.

Equity: The equity refers to the individual ability to pay tax. New York and Pennsylvania taxation levy tax on individual based on the income. With the increase in the personal income, there will be an increase in the personal income taxation. Despite that the direct tax system reflects equity; there is no equitability in the indirect taxation charged by the two states. For example, a wealthy person within the state pays the same indirect taxes with low-income earners. Thus, there is no equity in the indirect taxes charged in the states. Additionally, there is a general believe that there is no 100% equity in the personal income tax in both states because there is a general opinion that wealthy people are paying lesser taxes because they are not being taxed based on their income.

Accountability: A high quality tax system should reflect accountability to taxpayers. Accountability in the sense that the tax law should be explicit and not hidden. Typically, the in-taxation policies should be written in a clear language with clear written notice, and notice to taxpayers of the increase in taxation should be in a clear method to enhance accountability. In the New York and Pennsylvania, there is accountability in the tax system because the tax system within the states is written in a very understandable language. Additionally, the states do not arbitrarily increase the taxes on an individual without the prior notice.

Neutrality:

"Tax neutrality is sometimes used to describe a tax system that does not create a bias that could influence a taxpayer to choose one investment or course of action over another. As used in this context, a neutral tax provision is one that permits the choice of investment or action to be made on the basis of market or personal considerations without influence from the tax laws." (Kahn, 1990 P1).

While New York and Pennsylvania are doing all their best possible to implement tax neutrality, tax bias could not be totally eliminated. Kahn (1990) argues that the concept of neutrality in the state taxation is only used for political purpose. The author further argues that virtually all states in the United States implement tax bias. Typically, Pennsylvania does not implement tax neutrality with reference to property tax because the tax on property is based on millage rates. In the present global economic crisis, there have been drastic declines in the value of housing properties in the United States and despite the decrease in the value of the properties, tax policy makers may ask a property owner to pay the same tax paid before the decline in the market value of the property. Based on these criteria, Pennsylvania does not totally demonstrate element of neutrality in the property tax system compared to New York that imposes tax on properties based on the market values.

Competitiveness: With reference to the concept of competitiveness, the tax policy makers should use tax system as means of inter-state competition or international economic competition. Typically, the tax policy should be used for economic development. The tax systems in Pennsylvania and New York show that the states are conscious of the tax system of other states and they are trying to implement tax policies similar to other states. The tax policy makers in the two states know that the number of population of each state affect the level of revenue that the government would derive from taxation. Based on these criteria, the two states are trying to implement tax policy similar to other states so that they will not drive out taxpayers to other states.

Ranking of New York and Pennsylvania tax system to other similar jurisdictions

Tax systems of the two states are similar with other jurisdiction because all the states in the United States levy taxes on income, property, and sales. Despite the similarities of the tax systems of New York and Pennsylvania with other jurisdictions, the two states still implement little difference in the tax system with some jurisdictions in the United States. The states of Delaware implements tax system that is fair to the business organizations. . Typically, many businesses in the United States prefer to incorporate their business in Delaware because the tax policy in the state favors business owners. Based on the findings of the tax policies in the two states, there is a need to modify the tax policy to be well acceptable to business and residents of the two states. Typically, there is no evidence that the balance of tax and fees are appropriate because wealthy people in the states are paying lesser taxes than what they ought to have paid. Thus, there is a need to implement changes in the tax system in the two states. Income taxation should be reduced in the two states due to the present economic crisis…

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