I’m a small business guy. When our company needs cash, before we sell off assets, cut staff, or renege on commitments made to employees, we look at receivables and collecting the money owed us.
As a new legislator, I hope to do the same thing with state budgets and your money.
Six hundred million dollars. That’s the total for tax returns filed in Oregon that did not include a check or a payment plan. We need to do a better job of collecting those receivables. The amount is comparable to all the changes we made to PERS this year.
Tax cheats annually deny the state $1.3 billion by filing false returns, taking unreported cash payments, or failing to file at all. These criminals break the law, but we don’t catch and prosecute enough of them. The so called “tax gap” is enough to pay the difference between where our schools are and where we want them to be – adding back class days and teachers, reducing class sizes, and improving results.
There are other examples of money owed the state. Our Treasurer believes that Wall Street investment firms have swindled us out of over $150 million. This is more than simply receiving less than we had hoped for; we’re talking outright corporate fraud.
Tax Credits suffer abuse as well. At the Shepard’s Flat Wind Farm, the Department of Energy believes New York development firms improperly subdivided into multiple companies to claim $20 million in extra benefits on top of the $10 million they properly earned.
Perhaps the most outrageous example of tax avoidance is the Oregon firms that file in offshore tax havens like the Cayman Islands or Lichtenstein to avoid Oregon taxes. Losses are estimated at $18 million.
So what can be done?
Some positive steps are underway. Legislation is advancing closing the tax haven loophole. The Department of Justice is suing Wall Street. The Department of Energy is reviewing Shepard’s Flat. And some of us suggest that the Secretary of State should audit credits as aggressively as we do agencies.
The Department of Revenue has asked for 31 new employees. Eleven will work on collections and twenty on audits or fraud. For an expense of roughly $3.8 million, they expect to collect $19.5 and $13.6 million respectively — $31.1 million total. That’s a great rate of return! But some of us are asking why they can’t do more.
Consider adding just one revenue agent. In two months, they could pay for ocean mapping and measuring to support our fishing industry. In six months, they would generate enough to fund the entire request of our Small Business Development Centers and help local small business. In one year, they could pay for the proposal to encourage movie and television production in Oregon. No matter how you slice up their time, one more agent would create jobs.
Perhaps instead they could help treat mental illness, promote agriculture, improve roads or even cut taxes. I’d love a discussion on how to spend the money. The point is that more staff is needed to collect what is owed all of us.
What we need is legislative direction to the new director of the Revenue Department. I think he is doing well and moving in the right direction. But I’m new here and anxious. I want to see more. Recalculate the tax gap, both personal and corporate income, every two years to better understand the extent of the problem.
Ask the Secretary of State to audit the Department of Revenue at least once every four years.
Require tax compliance for all state vendors and contractors before they can do business with the state. Publish online a list of individuals and businesses that owe more than $15,000 and are out of compliance. Adopt a systematic and quantifiable plan to bring down the tax gap including performance measures, benchmarks, and timelines.
Oregon has one of the lowest combined tax burdens in the nation. But not everyone pays their fair share. And while I understand that organizing collections and confronting cheats will be difficult, I think it is an effort we need to make.
We have over a billion dollars each year in unpaid taxes. If you are among the Oregonians who painfully pay your fair share, this number should leave you frustrated and angry. As we talk in detail about raising revenue, funding or cutting programs, reducing retirement commitments, or creating jobs, we also need to talk about the money owed our state but not yet paid.
David Gomberg represents House District 10 from the Central Coast and Coastal Range. He owns a small business in Lincoln City.