Despite the fact that Pennsylvania’s tax amnesty campaign was routinely cited as “mean” and “inappropriate”, the Department of Revenue (“DOR”) felt that it worked. The DOR collected $261 million, about 40% than they had hoped for, which, while impressive, is statistically not as successful as a state like New Jersey which collected more than 3 times the amount anticipated.
Nonetheless, emboldened by their success (and apparently hoping to win Pennsylvania the title of “Most Cantankerous State”), the DOR is now publishing an online list of all tax liens filed in the Commonwealth. The idea, according to Revenue Secretary C. Daniel Hassell, is to shame taxpayers into compliance.
Really? Does the DOR think that’s all it takes?
I took a peek at the online list solely for purposes of this post. Quite frankly, otherwise, I wouldn’t take the time to check it out and I’m not sure what kind of person would.
The list is 1,483 pages long. That’s a lot of liens. But here’s the kicker: more than half of all taxpayers on the list owe less than $1,000. Liens and public shame for $1,000? It would seem to me that there are better ways to collect.
At the top end of the spectrum, I was surprised to see some household names. J Crew in Philadelphia owes over $1 million in delinquent taxes. Also near the top of the list? A Honda Finance company, a Staples superstore, Petco and Ford Motor Credit Company. Two health care systems, Tenet and Solis, also made the list. And that means… what exactly? Does the Commonwealth genuinely believe that J Crew and Honda will be so humiliated that now they’ll pay up when they wouldn’t before? I’m willing to bet that they don’t.
It’s also worth noting that the top delinquent, as well as a disproportionate number of those at the top, aren’t even located in the Commonwealth. The largest lien, topping more than $4 million, was slapped on UniTel, located in Naperville, IL. Good luck collecting that one.
Publishing a list of tax liens is nothing new. Many states and municipalities do it. But publicizing it the way that the DOR has done it, by publicly stating that the goal is humiliation, just feels beyond the pale. I also question how effective it is – now that the damage is done, what additional incentive is there for the taxpayer to settle up? Is the DOR going to follow up with a note that “John Smith has made good.” Of course not.
I’m not making excuses for those on the list. But I have been in this business enough to know that there could be a million reasons for a delinquency – especially the smaller ones. A missed coupon payment. A change of address that didn’t get filed. A final return that wasn’t paid after you thought your company was closed. An overlooked tax form. With interest and penalties, it doesn’t take a lot of rack up a mere $100.93 of debt (the smallest lien on the list). I think most of us during our lifetime have owed someone something. How would you feel if it were bandied about? What if Visa ran an ad campaign advising you to check out its list of folks who owe? “Look at Bob’s credit card bill!”
Again, not making excuses. But I have to think there’s a better way to collect. The DOR begs to differ. What do you think?
It’s not the same exact thing, but Kentucky uses a similar concept or approach by listing delinquent debtors on their DOR website (http://ilp.ky.gov/). I’m not sure how effective this “shame” approach is in getting taxpayers to pay back-taxes, penalties, etc. But I did want to point out that Pennsylvania is not the only state using this method (and I’m guessing there are others as well).
Y’all are right; this is a longstanding practice by state tax departments: http://goo.gl/p6XE and http://goo.gl/EcRy and http://goo.gl/n8JO
Yes, basic tax collection fundamentals like 1) sending notice of the debt owed, 2) sending a repeat notice, 3) setting a lien, 4) following through on the final steps after the lien has been placed (garnishment, attachment, adjudication or whatever their state law allows), and 5) putting the majority of your staff time toward collecting the largest debts owed, etc., are probably better ways to collect more revenue.
But, assuming PA has taken all those steps already, I wouldn’t blame them for upping the ante.
It’s actually Naperville, IL, and, for an appropriate fee, I would be happy to assist the Commonweath in recovering the sums they are owed. 😎
Ah, Naper-Napers, po-tay-to, po-tah-to.
Just kidding, Bryan, thanks for the note. All fixed!
It is not clear from your post if the Pennsylvania liens are final adjudicated amounts. Could some of these be assessed liabilities that have been appealed and are still waiting final resolution?
John (and American Delight),
Usually liens are the “final” amounts but can still be appealed and litigated in certain circumstances. In some instances, the Commonwealth will file a lien to protect their interest if the taxpayer doesn’t pay in full while the matter is pending. I had a client who recently settled a matter where that was the exact case.
I’ve also had clients who were unaware that liens had been filed until they checked their credit reports for a mortgage or other purpose. If you move, for example, you may not receive proper notice. For purposes of tax liens, you don’t have to be served in person.
The DOR would be better off allowing payments with low interests or no interest at all rather than persecuting people. I had to use my tax funds to make it through the recession because I could not collect unemployment even while having about 10,000 in my unemployment account. What was I supposed to do go live on the street? The world does not need another victim by our government.Creating more homeless people creates more beuracracy and creating more high interest rates creates more debts. It doesn’t make any sense.Pressure cooking people creates more homocides. I guess more drama creates more news. I ought to of been a news anchor.Lots of job security there.