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State Could Staff Up and Collect $100 Million in Unpaid Taxes

i Mar 12th No Comments by

A small Investment in the Dept. of Revenue can generate $100 million in uncollected taxes for critical public services

A new report by the Institute for Wisconsin’s Future shows how Wisconsin would profit by following Minnesota’s model for closing its tax gap. The report – Investing in Revenue – shows there are more than $900 million in taxes legally owed to the state but not collected. There are also several hundred million more in taxes that should be paid but haven’t been because of either deliberate or accidental misfiling or failures to file a tax return. One simple solution to Wisconsin’s revenue crunch is to invest in staffing needed for the state’s Department of Revenue (DOR) to access this large pool of uncollected tax dollars. The report examines how this has been done in Minnesota with great success.

This strategy has worked here before. In 2009, the state legislature invested nearly $12 million for additional DOR tax-collection staff. The goal was to raise an additional $70 million. DOR raised far more than this. Under the current state budget, the department lost another 52 staffers. Eighty positions within DOR remain vacant. All this translates into a major financial loss for Wisconsin.

At this juncture, Wisconsin could invest $12.5 million in resources for the Department of Revenue and realistically expect to generate $100 million in additional revenue during the 2011-13 budget biennium. This is a net gain of $87.5 million. All that’s needed are the staff and technology to collect the cash. This requires no change in tax policy, no increases in tax rates or in fees. The money to expand DOR capacity would be repaid sevenfold by new revenues obtained.

Dennis Collier, the author of the report, is the former Director of Tax and Fiscal Policy for the Wisconsin Department of Revenue. He has seen how the staff reductions at DOR have reduced the Department’s ability to collect the money owed. “While Wisconsin has cut staff and watched revenues drop, Minnesota has invested in their Department and seen a consistent increase in monies collected. If we follow their strategy, we can avoid further cuts to important programs such as health care and education.”

Rep. Cory Mason (D- Racine), ranking Assembly Democrat on the Legislature’s Joint Committee on Finance said:

“Budgets are all about choices and priorities. Scott Walker has told us that he had no choice but to slash funding from our UW system, our public schools, and our job training and health care programs. This report makes clear that there are indeed other choices available to our state. Before we kick one more child off BadgerCare, or take another dollar from our public schools, we need to aggressively collect the tax dollars that are already owed to Wisconsin.”

The full report is at www.wisconsinsfuture.org. The Institute for Wisconsin’s Future is a non-profit research and public education organization based in the Milwaukee area. Its work is funded primarily by nationalphilanthropies.

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