While some lost tax revenue is due to loopholes and
manipulation, another tax drain is straight-up tax cheating by corporations and
individuals. States are responding with a variety of strategies for
catching these tax cheats and recovering this lost revenue:
Cracking Down on Abusive Tax Shelters: A
2001 Multistate Tax Commission report estimated
that tax shelters designed to illegally evade taxes cost states as much as $12
billion per year. Facing the largest losses in the nation, California pioneered
legislation requiring new reporting on the details of suspicious
shelters, enacting heavy fines for using illegal shelters, and creating an
amnesty program to promote voluntary compliance. The amnesty program
brought in a cascade of revenue: over $1.4 billion from 1,202 taxpayers, or an
average payment of over $1 million per taxpayer, reflecting
the widespread tax cheating among this wealthy population.
Other states are following suit.
Multi-State Collaboration: Going beyond the occasional
cooperation between state auditors, eight states, led by Massachusetts,
created a new
multi-state agreement to share data in a project
called the Clearinghouse, which will compare information on people who work in
one state and earn income in another in order to reveal tax cheating.
Shaming Tax Cheats: To encourage payment by
delinquent taxpayers or those caught violating the law, more than a dozen
states have begun publishing
lists of businesses and individuals owing taxes on the
Internet. Connecticut pioneered this
high-tech shaming strategy in its Top
100 list, which collected more than $161 million in overdue tax
debts over its first seven years. Other
states have been collecting similar amounts with their own programs.
