Saturday, June 02, 2007

One for you, nineteen for me...

A few years ago, when I was still a Republican, I received a notice from the Indiana Department of Revenue. That in itself is not unusual. If you are in business you receive a multitude of notices from different divisions of the state and federal tax collection agencies. Its not unusual for a small business with just a couple of employees to fill out 15 or 20 forms every month or quarter, sometimes more.

But this particular notice was a little different. It claimed that I had underpaid my withholding taxes for the month by a penny. Along with that penny, the state also wanted $1.50 in interest, and $15.00 in penalty, bringing the bill to $16.51.

My first inclination was to simply pay the bill and be done with it. Our accountant, however, maintained that her figures were correct, and challenged the bill. The departments first response was that our original figures were correct, but the payment had been late. When our accountant produced the bank documents showing that the deposit had been made on time, the departments second response was that they had made a mistake, and that we should just forget it.

I wondered at the time how many phony bills were sent out by various tax divisions, and how many people like me would automatically send in the payment to avoid getting cross ways with the tax man. Of course I had no way of knowing, but I suspect across the nation it could amount to millions of people, and millions of dollars.

I hadn't thought about that incident for awhile, but something happened the other day that jogged my memory. My oldest son called and said he had received a letter from a collection agency in Wisconsin, claiming that he owed $649.32 in back taxes from the year 2000, and that in order to avoid further charges, it needed to be paid at once. Several things didn't seem right. First of all, he was a sophomore in college that year, and he didn't even make $649.32. Secondly, I was sure that the government used Sheriffs and U.S. Marshals to do their collecting, so as not to have to share the profits. And third, we found it odd that he had never received any previous notification from the Indiana Department of Revenue, which the letter claimed wanted the money.

A call to the Indiana Department of Revenue proved me wrong about their collection tactics. They confirmed that they did use collection agencies, even ones that were under investigation for questionable practices, like OSI Collection Services Inc, the agency that sent the letter from Wisconsin. The department, however, could not find any record of money that my son owed, or even a mention of collection proceedings.

A call to OSI Collection Services, Inc, revealed that they had matched his first initial and last name to an overdue account, and the sent out the bill. Once again, I have no way of knowing how many people with the same first initial and same last name as my son received the same bill. I also have no way of knowing how many people just paid the bill rather than risk the wrath of the Department of Revenue. I'm sure some did. Hopefully most didn't.

But it certainly makes a case for more simple "pay as you go" sales tax and user fees. The federal tax code has over 70,000 pages. Every state has its own complicated system of state income taxes, county income taxes, city income taxes, economic development income taxes, property taxes and on and on and on. Most of it too complicated for the ordinary citizen to understand.

And complicated enough that unscrupulous tax collectors, public and private, can use it to their advantage. Tax collectors that could be eliminated with a simpler system.


Blogger Mike Kole said...

Good thing 'Bell' isn't a common name like 'Smith' or 'Jones', or a lot of people might end up with a bogus bill!


10:34 AM  

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