Warning for Tax Scofflaws: These States Want You!
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Stateline
October 17, 2013

In New York, state tax scofflaws now have a stark choice: Pay up or lose your driver’s license.

Since New York launched a new program targeting tax delinquents last August, the state has picked up $4 million in back taxes, out of an estimated $26 million owed, according to state officials. The program, set to end in the middle of November, applies to taxpayers who owe more than $10,000.

“Our message is simple: Tax scofflaws who don’t abide by the same rules as everyone else are not entitled to the same privileges as everyone else,” New York Gov. Andrew Cuomo said. “We’re providing additional incentives for the state to receive the money it is owed and we’re keeping scofflaws off the very roads they refuse to pay their fair share to maintain.”

Other states also have used the threat of license revocation to chase down tax scofflaws. Louisiana, for example, is threatening to revoke driver’s licenses as part of a tax amnesty program slated to run until mid-November, and California pursued the same strategy two years ago.

RELATED:  YOU WON'T BELIEVE WHICH STATE TAXES ITS POOR THE MOST 

Since 1982, 46 states have implemented some kind of program to shame, punish, incentivize, forgive or otherwise chase down state tax scofflaws, according to the Federation of Tax Administrators, a Washington-based research group that provides information to state tax officials.

It is difficult to pinpoint the total amount of unpaid state taxes nationwide. However, if the delinquency rate for federal income taxes—21 percent—is applied to state income taxes, which total $400 billion, the lost revenue would amount to about $84 billion.

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The incentive for states to collect unpaid taxes was particularly strong during the recession.  The budget situation has brightened in most states, but many of them have continued to strive for more revenue from those who owe.

“The states are still in a recovery mode from the last several years,” said Kathleen Thies, an analyst for the financial firm CCH, which tracks state taxes. “The state coffers are still pretty light. Maybe the same percentage of people are not paying their taxes, but states are going after them more aggressively.”

CARROTS AND STICKS
In New York, the Dept. of Taxation began its program by mailing letters to 14,000 tax debtors, giving each of them 60 days to settle their tax debts or create a payment plan. Then it sent second letters to those who failed to respond, and it is about to send final warning letters. This week, the state will begin to suspend driver’s licenses. 

RELATED:  THE 10 BEST STATES FOR TAXES 

New York is not offering any formal amnesty, but the state tax department website does dangle a carrot: If the delinquents pay up under the “voluntary disclosure and compliance program,” they can work out a payment plan for the taxes and interest owed. They also can avoid penalties and possible criminal charges by pledging to pay their taxes on time in the future.