Needless Local Revenue Losses
WASHINGTON–“There’s gold in them thar hills” used to be the expectant cry of the 19th century prospector. Today the inquiring citizen-taxpayer could direct the same words towards state and local government which are losing billions of dollars every year in uncollected corporate tax revenues, lost procurement savings, and non-interest bearing government accounts.
Here is a list of hidden lodes where badly needed revenues could be obtained simply by enforcing existing laws and pursuing prudent government management practices.
1. There is a national scandal in corporate evasion or underpayment of property taxes. Public Citizen’s tax reform group estimates that local governments lose a minimum of $7 billion a year through underassessment and evasion, most of which is corporate. Whether it is coal companies in Appalachia, oil and gas firms in Texas, timber and gaper companies in Maine, mining companies in the west, and industrial plants and commercial office buildings throughout the country, the message is the same. The big companies pay less while the small homeowners and small businessmen pay more property taxes as a result.
Senator Muskie’s subcommittee estimated, for example, that U.S. Steel’s Gary, Indiana plant is underassessed by $119 million. The local assessor has been denied information by U.S. Steel about plant value and equipment. More details on property taxes chicanery by companies and mass appraisal firms can be obtained by writing to the Tax Reform Research Group, P.O. Box 14198, Washington, D.C. 20044.
2. Companies who fudge on turning over sales taxes to the state or who evade personal property taxes by moving inventory or equipment out of the state just before tax time are fertile areas for investigation. Presently in Missouri, state authorities are
investigating an annual loss of some $100 million in state retail sales taxes which are collected by businesses but not remitted to state revenue offices.
Companies operating interstate frequently play off one state against another to escape taxes. The Illinois Insurance Department has ordered eleven insurance companies either to move their real headquarters to Illinois or drop their false “store-front” home offices which are designed to escape premium taxation by other states as well as by Illinois. Commissioner Fred Mauck estimates a $5 million a year tax loss to Illinois unless this practice is stopped.
On July 31, 1973 the Illinois Department of Revenue issued a notice of tax liability in the amount of $45.9 million against the Illinois Bell Telephone Company for the period July 1967 to November 1970. The phone company claims that there should be no tax on receipts from alleged interstate commerce–that is, long distance calls out of state.
This is a frequent accountant’s defense which has been inadequately challenged by understaffed state agencies.
3. Poor management of state and local pension-retirement, operating, and capital funds lose citizens many millions of dollars annually. Recently there have been verified bearing reports of state and local government operating funds in non-interest/bank accounts. This shocking official irresponsibility means less state revenues which could lead to higher taxes for the people.
For the huge pension and capital funds the problem is one of under investment. There is utterly too much secrecy surrounding facts which citizens have a right to know. Conflicts of interest is one reason for secrecy. Until this spring, for instance, the Maryland State Treasurer was also the head of a Baltimore bank and a banking industry leader.
3. State and local procurement of services and supplies total nearly $40 billion a year. Mismanagement, corruption, and the frequent abuse of competitive bidding cost taxpayers at least a quarter of that sum. For example, more centralized purchasing direct from manufacturers to avoid unnecessary or wholesale markups would promote great savings. The Federal General Services Administration urged this course of actionon the states over three years ago but stopped when the wholesalers’ trade association protested to powerful members of Congress and the White house.
5. State pension and retirement funds invested in common stocks pay a sizable commission to brokers. Connecticut State Treasurer Robert Berdon revolted against this practice last year and obtained, over great opposition by the securities industry, a seat on the PBW exchange to save the state $1 million a year in brokerage fees. Other states (Washington, California, Massachusetts, Pennsylvania) are watching the Connecticut move because they are considering doing the same thing.
So before state and local taxes go up on the little taxpayer, citizens should inquire of their state and local officials what they are doing to recover all of these lost revenues.