<p>“I believe we are talking enough money that it would dwarf any tax cut or increase being discussed. In my earlier example I used an estimate of a $1 billion in NJ for one year. I bet that is conservative.”</p>
<p>Well then, this has become a sort of de facto social welfare system.
These dollars should be counted as a means to keep the companies in business.
The employees are, as usual, paying the tax.</p>
<p>Are we talking about the employees who gets paid in cash and there’s no record of it, or employees who get W-2s showing how much Fed/State/FICA was withheld, but not paid to the Feds or the State? I’m surprised you can get away with the latter - does the IRS really care if you tell your state congressman that you’re going to let people go?</p>
<p>We are talking about employees who get a w-2 that shows withholding but the employer does not send it in. The bigger problem is sales tax though- at least on the State level.
You can only get away with it because as I tell people our job description is empty the ocean and we have been given a teaspoon.</p>
<p>I googled what does the IRS estimate the tax gap is each year- that is the amount paid versus what should have been paid- the IRS estimates the gap is 15-16%.</p>
<p>So NJ has a $30 billion dollar budget if the gap is 15% we are talking about $4.5 billion. Now not all of that is trust taxes but we are talking a big number however we slice it. I am making the assumption that the tax gap would be fairly uniform between both the IRS and the State.
I will also tell you no matter your perception NJ is much more aggressive and pro-active in dealing with non-compliance than the IRS is. I will acknowledge that is not the the perception however.</p>
<p>tom,
How expensive is it to collect these arrears?
What is the impact of volume of work on these costs ?</p>
<p>performersmom- in NJ the way it works is we generate bills. The initial bill goes out with only interest. If you pay that there is no penalty. If that bill is not paid after x number of days the file is sent to a private collection agency. They get 1000’s of cases a month. They attempt to get paid and if they do not there is a process for them to file a judgment. Once they have a judgment in place the cases are sent to my staff. My staff works the cases with the judgments and we also look for businesses that have not filed and no one knows about. My average employee makes about 50-$60k plus benefits and collects well over $1 million dollars a year. The collection agency employees make about $10-15 dollars an hour plus commission. I have no idea what type of benefits they receive. NJ is unusual in that the easy collection cases go to the private company. My staff only deal with the cases that have already shown an inability or refusal to pay.</p>
<p>As to how expensive- it depends at what level if they pay the initial bill it is cheap to collect, if it goes to the private company it is more costly. We add 10% extra to all cases that go to the private agency. That fee can be waived though. It is very expensive once the case is in my area. We add an additional cost if a judgment has been filed- again that fee can also be waived.</p>
<p>The private firm does volume work. I will ask what they believe it costs them.</p>
<p>Maybe I could get a job at a collection agency- sounds to be a booming business these days!
Do you think the net marginal cost of collection goes down with volume??</p>
<p>One just has to wonder if there is not a big opportunity to make this more efficient. And whether, without that, it is worth it.</p>
<p>What do you think the ultimate success rate is, another big factor in whether this is all worth it?</p>
<p>At this time, the mentality of this country seem to be - don’t pay if you can get away with it. Look at all the people who have stopped paying their mortgages, have walked aways from their homes, who live for today, without regard for the future or others.
Look at the bail-outs.
This seems to be the message of the times…
There is no penalty for being irresponsible, really.</p>
<p>Makes you wonder what would happen if we had a large VAT tax. Would these companies keep that too?</p>
<p>The impression many of us have of the IRS is that it’s two steps above God (or perhaps the devil) in its ability to extract money from the delinquent - ie., get it from wherever the cashflow of the business goes through. Are you saying they’re actually reduced to the equivalent of just some third world telemarketer trying to charm the business into sparing a few coins?</p>
<p>Dad- no the IRS and State tax collection agencies have significant more power than a collection agency. The issue becomes finding the assets. If you can find the assets you get paid. The problem is many of these people have no assets. You can not put all of them in jail.</p>
<p>busdriver the answer to your question is yes. That is why I always laugh when the proponents of the fair tax argue it would get rid of the IRS. A fair tax would require so many more tax agents it is laughable they make that argument.</p>
<p>performersmom- my opinion is the efficiency is getting to the non- compliant taxpayer early. That means personal contact- not over the phone but knocking on the door. That means more people. The cry of the day is less government employees. As I mentioned earlier my staff collects at least $15 dollars for ever $1 of cost. They also do not get credit for people we get on payment plans or money collected through bankruptcy that was filed as a result of action we took. So the return is really even better.</p>
<p>Also are computer system has not been upgraded in 25 years. We need some money spent there but no one ever approves it. For all the supposed waste in government I never see excess spending. My staff is reimbursed 31 cents to use their personal cars and we purchase many of our own office supplies. We have been known to pay to fix the limited number of government cars so we could keep the car on the road.</p>
<p>tom,
You definitely have a tough go. I would just do your very best to catch the cheaters.
At this point, tough luck to the businesses who do not pay and get caught.</p>
<p>We should all write letters to our congresspeople about the mess here.
How about letters to the WSJ, NYTimes, or the Economist , or even 60 Minutes to suggest a topic for a piece?</p>
<p>OOC, are the funds in question here counted in the budget or not? What I mean is the government assuming all the tax receipts come in when they state the deficit?</p>