Term Paper on "Tax Revenue Analysis Project"

Term Paper 10 pages (3010 words) Sources: 10

[EXCERPT] . . . .

Tax Revenue Analysis Project

Tax is a fee levied by the government on income, property, sales and other activities. New York is one of the few states in the United States having its own incomer tax as well as having the highest property taxes. In New York, every income-earning individual, trust or estate residing in the New York city are required pay personal income tax, and the government calculates taxes to be paid by tax payers based on the number of day an individual resides in the states. In New York City, tax rate on personal income range from 4% to 6.85% depending on the level of income. Pennsylvania also has its own personal income tax, which is about 3.07% on taxable income.

Additionally, New York City has property tax system levied on all properties. New York Department of Finance values all the residential and commercial properties located in the New York City, and the assessment of the properties for taxation is based on the percentage of market value of residential or commercial properties. Although, it is possible for property owners to challenge the taxes levied on the property if the owner does not agree. In New York city, property tax rates is between 10% and 17% and the rates depend on the type of property, and the government sent property bill in two semi-annual. In Pennsylvania, the state does not levy taxes on properties rather the taxation on property is reserved for the local government. Pennsylvania levies property tax on real estate, building or land. Unlike New York City, property taxes are based on millage rates where one mill is equal to $1 on every $1,000 of the property.

More importantly, New York City imposes sales tax on goods and services and the government imposes taxes on tangible goods such as food, clothing, and footwear. The government also imposes taxes on intangible goods such as barbing, credit reporting services or credit rating. Sales tax in New York City is 4.5%. Unlike the New York, Pennsylvania sales tax rate is 6.0%. Although, Pennsylvania does not levy sales taxes on items such as food, textbooks, most clothing apparels and drugs. Typically, both New York City and Pennsylvania derive significant amount of revenues from income taxes, sales taxes and property taxes.

Fundamental objective of the study is to provide Tax Revenue Analysis Ratios of New York City and Pennsylvania.

Overview of the State Revenue System

Government revenue is a source of fund for the government. It is a method by which government acquires funding for all projects. In the United States, government could raises revenue from the personal income tax, sales tax and property tax. While there is a difference in the total population of each state in the United States, the revenues accrued from the personal income taxes, sale taxes and property taxes are different based on the population of each state. In 2010, the total population of New York is 19,378,102, and the total population of Pennsylvania is 12,702,379. Based on the total population of New York and Pennsylvania, the ratio of population of New York and Pennsylvania is 1 to 0.52. The result shows that the population of New York is 45% higher than the population of Pennsylvania. (See Table 1).

Table 1: Population of New York and Pennsylvania

States

Total Population in 2010

New York

19,378,102

Pennsylvania

12,702,379

Source: U.S. Census Bureau (2012).

Based on the data provided in table 1, the study provides tax revenue analysis ratio for the New York and Pennsylvania.

Tax Revenue Analysis Ratios

The total operating revenue for the New York at the end of 2009 fiscal year was $17,209 million, which was approximately $17.2 billion. In New York, the operating revenue for 2010 fiscal year was $22,490 million, which is approximately $22.5 billion. As being revealed Table 2, the operating revenue consists of revenue derived from ticket, employer contribution, tuition and fees. The detailed of New York operating revenue is revealed in the Table 2.

Table 2: New York Operating Revenue 2009 ($ Million)

Operating Revenue ($ Million)

New York 2010

New York 2009

Ticket and video gaming sales

7,818

7,660

Employer contributions

8,603

3,582

Tuition and fees, net

1,552

1,454

Government grants and contracts.

1,468

1,676

Private gifts, grants and contract

Hospitals and clinics

1,723

1,596

Auxiliary enterprises

Other .

Total Amount

22,490

17, 209

Ratio: Operating Revenues/Population

888/1

1160/1

Source: State of New York (2010), State of New York (2009).

Based on the data collected, the ratio of operating revenue with the New York population is presented as follows:

At the end 2009 fiscal year, New York Operating Revenue and Population ratio is 17,209,000,000/19,378,102=888/1

At the end of 2010 fiscal year, New York Operating Revenue- Population ratio 22,490, 000,000 / 19,378,102= 1160/1

Based on the calculation, results of the Operating Revenues/Population for the New York at the end of the fiscal year 2009 reveals that New York provides operating revenue of $888 per each person resident in the New York. However, in 2010, New York has been able to increase the operating revenue by $1,160 per each person resident in the New York. Between 2009 and 2010, New York has been able to increase the operating revenue of each person resident in New York by 30.63%.

Table 3: Operating Revenues/Population of Pennsylvania ($million)

Operating Revenue

2010

2009

State Lottery Fund

3,053

3,088

Unemployment Compensation Fund

5,012

2,422

Tuition Payment Fund

Sales and services

5,011

2,422

Other.

0.556

0.587

NET OPERATING REVENUES

5,012

2,422

Total

18, 245.6

10,508.6

Ratio: Operating Revenues/Population

1436/1

827/1

At the end of 2009 fiscal year, the Pennsylvania Operating Revenue and Population ratio is equal to 10,508,600,000/12,702,379=827/1

At the end of 2010 fiscal year, Pennsylvania Operating Revenue and Population ratio is equal to 18, 245, 600,000/12,702,379=1436/1.

From the data presented Table 3, the results of the Operating Revenues/Population for the state of Pennsylvania at the end of the 2009 fiscal year shows that Pennsylvania provides operating revenue of $827 per person resident in Pennsylvania However, at the end of 2010 fiscal year, Pennsylvania has been able to increase the operating revenue by $1,436 per person. Between 2009 and 2010, Pennsylvania has been able to increase the operating revenue of each person resident in the state by 73%.

Ratio: Cash + Short-Term Investments/Current Liabilities

In accounting term, the current liabilities are the debts or obligations due within one year. Typically, current liabilities are the debts that an organization must pay within one year. In New York, $24,672 millions are recorded for current liabilities at the end of 2009 fiscal year. In the New York financial statement, current liabilities are recorded as liabilities due within one year. At the end of 2009 fiscal year, $9,631 million is recorded for cash and short-term investment and $10,715 million is recorded for cash and short-term investment in New York.

Table 4: Ratio: Cash + Short-Term Investments/Current Liabilities ($Million)

New York

Activities

2010

2009

Current liabilities

28,739

24,672

Cash+ Short Tem Investment

10,715

9,631

Ratio: Cash + Short-Term Investments / Current Liabilities

0.37: 1

0.39: 1

Pennsylvania

Current liabilities

15,100

12,700

Cash and short-term investments

15,300

15,000

Ratio: Cash + Short-Term Investments / Current Liabilities

1:1.01

1:1.18

Source: State of Pennsylvania (2009), State of Pennsylvania (2010), State of New York (2010).

Based on the data presented in Table 4, the ratio of Cash + Short-Term Investments / Current Liabilities in the New York at the end of the fiscal year 2010 and 2011 is almost the same. At the end of fiscal year 2009, the ratio is 1: 0.39 while the ratio of Cash + Short-Term Investments/Current Liabilities at the end fiscal 2010 is 1: 0.37. However, at the end of the 2009 and 2010 fiscal years, the cash position is less than one. The major factor leading the cash position to be less than one at the end of the fiscal year 2009 and 2010 is that the government has issued debts, which is not resulting in a capital asset and not related to the government activities. These outstanding debts include future tobacco receipts, state borrowing to finance bridge project and local highway. Typically, the cash position will be less than one in the state as long as the state continues to pursue other obligations rather than the acquisition of capital assets. Additionally, the cash position is less than one because there is an increase in unemployment within the state making the New York state government to increase the payment of the unemployment benefits. Typically, the "unemployment benefit payments for the Unemployment Insurance Fund exceeding employer contributions." (State of New York 2010 P. 22).

Contrary to the data presented for New York with reference to the Ratio: Cash + Short-Term Investments/Current Liabilities, Pennsylvania recorded very close results on the ratio of Cash + Short-Term Investments/Current Liabilities for the 2009 and 2010 fiscal year, and the cash position is greater than one.

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