First, more taxpayers remit taxes as they become due, avoiding penalty and interest charges completely, increasing collections and decreasing enforcement costs. Second, there will always be some taxpayers who, for whatever reason, will often be delinquent. The interest revenue from this population will increase as the rate is increased. The rate charged on delinquent taxes was six percent prior to 1980. The Internal Revenue Service charges an interest rate equivalent to the federal short-term rate plus three percentage points.
Interest is compounded daily.
This rate would be roughly equivalent to the forecast prime rate plus two percentage points. Using a fixed percentage would minimize both Comptroller and taxpayer resources required to implement this proposal. This estimate is only for the limited sales, excise, and use tax, and assumes an effective date of January 1, 1991. Similar but smaller effects would exist for other taxes covered under Title 2 of the Tax Code.