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Better Enforcement of Tax Law

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.

California Legislative Analyst's Office - Abusive Tax Shelters: Impact of Recent California Legislation
Multistate Tax Commission - Model Statute on Disclosure of Reportable Transactions: requires disclosure of transactions with potential for tax avoidance or evasion
Multistate Tax Commission - Model Statute for Tax Avoidance Transaction Voluntary Compliance Program: creates a voluntary compliance (amnesty) program
Multistate Tax Commission - Model Statute on Compilation of State Tax Return Data: requires taxpayers to report certain data as filed on the tax returns in the other states

From the Dispatch

State Revenue Increases Across the Nation Continue to Ease Pain of Downturn

May 24, 2010

As this Dispatch will detail, these votes mirror actions taking place in both conservative and progressive states and localities around the country. In 2009 and 2010, states have enacted a wide-ranging set of revenue increases to cope with cumulative 2010 and 2011 deficits of approximately $375 billion. Although revenue forecasts are improving, states are still reeling from historic declines in the past year.

What is remarkable is that the anti-tax movement has wracked up such regular failures in the crisis, as even many state leaders previously signing "no taxes" pledges have reneged on them. Instead, popular demand for new revenue to avert budget cuts has driven legislative movement on progressive tax and budget policy.

Adding to the general public support has been research consistently showing that progressive revenue increases during a downturn is a better alternative to cuts in order to promote growth and protect vulnerable populations suffering during the recession.

Finally, this Dispatch will outline some of the effective messaging and research to demonstrate to voters that progressive measures and tax increases are economically sound and go to the programs they want preserved -- the critical step in the success of revenue campaigns.

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Report: Stop Retailers Pocketing over $1 Billion in Sales Tax Revenue

Nov 25, 2008

According to a new study by Good Jobs First, state and local governments lost over $1billion in sales tax revenue last year as a result of laws that allow retailers to retain a percentage of the sales tax they collect.
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Dos and Dont's of Coping With State Budget Crises

Feb 19, 2008

The budget news is grim in some states. Twenty states face a combined budget shortfall of at least $35 billion for 2009, according to analysis by the Center on Budget Policy & Priorities (see CBPP graph below). Another 8 states will likely have budget problems next year or the year after.
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Cracking Down on Misclassification of Workers-- And Raising Tax Revenue

Feb 14, 2008

In a dramatic sweep of 117 employers, a new New York State joint task force of state labor, tax and worker compensation agencies found that 2,078 employees had been illegally misclassified as independent contractors, with $19 million in wages not reported to the state. An additional 646 workers were owed minimum wage and overtime pay totaling $3 million.
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