Reduce deficit by nabbing corporate scofflaws - East Valley Tribune: Opinion

Reduce deficit by nabbing corporate scofflaws

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Posted: Tuesday, April 21, 2009 9:48 pm | Updated: 2:28 am, Sat Oct 8, 2011.

As thousands of teachers begin to lose their jobs as a result of deep budget cuts, we are all paying much more attention to the state's budget crisis, and the tough decisions we, as a people, will have to make.

State lawmakers have floated ideas on how to fix the crisis, ranging from a new $1 billion sales tax hike to even deeper cuts to our schools and universities and other job creation engines.

But there's another option - a much less painful one - that should be a part of any solution: collect delinquent taxes already owed to the state.

The state's Department of Revenue estimates that Arizona is owed about $240 million in unpaid corporate taxes.

These are not individual taxpayers; instead, these are taxes owed to the state by large corporations that haven't paid up. That's a serious chunk of change and nearly the same amount cut earlier this year from the K-12 and university budgets - combined.

If we have a choice, doesn't it make sense to collect what corporations owe so we don't have to make deep cuts to our schools?

The answer may seem obvious to many of us, but too often those at the state Capitol have misplaced priorities. The controversial budget that Gov. Jan Brewer signed into law on Jan. 31 did indeed cut hundreds of millions of dollars from Arizona's education system and block efforts to collect the delinquent corporate taxes.

The governor terminated one-third of the agency's workforce - 300 employees - including 114 auditors and 94 collectors.

The results have been devastating. Brewer's own revenue chief, Gale Garriott, said the $9 million "saved" by the cuts will actually cost the treasury an additional $174 million in lost revenue in less than two years.

Some lawmakers, such as Senate Appropriations Chairman Russell Pearce, who championed the cuts, argue they cannot be avoided.

But that shortsighted view, rooted in ideology, fails to understand a simple truth: the Revenue Department is different from other state agencies. Its primary function is to collect revenue - which our state and schools desperately need - and work with delinquent corporations that want to comply with the law. Garriott estimates that individual state tax collectors generate $800,000 in delinquent taxes, and individual auditors produce $400,000, annually.

The Legislature's ideological opposition to taxes fueled their desire to weaken the tax collector, which produced an ironic result: the governor has been forced to ask for a larger tax increase than she would have otherwise thought necessary.

It's a point that demonstrates that in moments of crisis, we cannot afford to wrap ourselves in ideology. Arizona's leaders have a responsibility to reject liberal and conservative labels, put partisanship aside and instead embrace pragmatic measures that allow us to govern with an eye toward the future.

The governor and Legislature should pursue two simple, common sense solutions that will help enforce the tax laws already on the books. First, immediately re-hire the 300 employees who can help make sure we don't lose unnecessary revenue in the next fiscal year. Second, enhance the agency beyond its capacity in January so we can work with the delinquent corporations who owe the state $240 million.

A strong Revenue Department makes sense. In times like these, we have a responsibility to do everything we can to collect owed revenue first - before we raise taxes, and before we make harmful cuts.

Seth Scott is the executive director of the Arizona Economic Council, a nonprofit organization that seeks to promote ideas to create jobs, strengthen the economy and educate Arizonans about the economic issues facing our state.

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