Target tax dodgers, but take care in spending money

THE LEGISLATURE appears poised to finally spend some money to go after tax scofflaws, who have run up debts of more than $300 million in unpaid income taxes as the state has faced its fiscal crisis by slashing its tax collection staff to 1969 levels.

Under a plan approved by the House and the Senate Finance Committee, the Revenue Department would receive an additional $10 million next year to hire an extra 110 auditors, tax collectors and support staff to go after delinquent taxpayers. That is one of the few unquestionably smart and sound decisions legislators have made in crafting next year’s state budget.

Frankly, this is a no-brainer, and it’s disturbing that the Legislature has taken so long to start bringing tax collection efforts back up to levels approaching those before the recession. If lawmakers can’t see the benefit of spending money in order to get such a direct and immediate payback, how in the world will they ever understand that spending on education and infrastructure and police and environmental protection is a wise investment that will pay off over time?

Unfortunately, it’s not clear legislators have actually figured out that “investing” in revenue collection is important. They only signed on after Revenue Director Burnet Maybank said he was so sure he could collect $90 million in back taxes if they gave him the extra $10 million that he would resign if he failed. Based on that, the House and now the Senate Finance Committee — whose members scoffed at the idea until they realized the alternative was to make some difficult decisions — have made plans to spend the $90 million next year.

Budget writers insist that they are being careful, allocating the $90 million to areas that aren’t critical, and warning agencies in advance that the money might not come in. And in fairness, there is some precedent for confidence: When the Legislature gave the Revenue Department an extra $1.5 million two years ago to rehire some auditors and collectors, they were able to increase tax collections by $22 million.

But while it is not unreasonable to count on the Revenue Department being able to collect more than $10 million in back taxes next year, we are not comfortable with the state counting on collecting all the money in time to meet next year’s budget needs. Doing so is yet another example of lawmakers relying on gimmickry and hope to balance the budget.

This is similar to the approach the House took to Gov. Mark Sanford’s idea of selling off $30 million in state-owned property and using that money to help balance next year’s budget. Like beefing up the tax enforcement staff, it’s a smart thing for our state to do. But it’s also something we shouldn’t bet the farm on. As the Finance Committee wisely concluded, in halving the amount of property-sales revenue it includes in next year’s budget, you risk having to unload property at fire-sale prices when you create such a tight deadline.

Lawmakers should definitely invest the money the Revenue Department needs to collect the money tax cheats owe us, and they should move forward with plans to sell property the state doesn’t need. But in both cases, they need to understand that many variables beyond their control will determine how much of the money will be realized in the coming year. And they need to build next year’s state budget accordingly.