Delinquent States

February 19, 2010

In an effort to shame people into paying their taxes, Rhode Island has posted the state’s top 100 tax delinquents, who owe the state a combined $16 million. The list is here. Rhode Island, with a $219 million deficit, is in need of the money.

But just as many state’s coffers are in the red, taxpayers are hurting financially too. And some states are not paying taxpayers their much needed tax refunds on time. Not paying your taxes to the state on time is a big deal, resulting in a fine usually. And if the reason you are not paying taxes is that you do not have much money, a fine will hurt.

States should not be granting amnesties every two years, but they ought to follow the same rule of law (or explicit expectations) they demand of citizens. Well those delinquent states at least need their own shame list:

  • Hawaii: Individual and corporate tax refunds to Hawaii residents will be delayed until July 1st.
  • North Carolina: To make sure the state has enough money to pay its bills North Carolina will basically send out refund checks when they feel like it.
  • New York: Paterson wants to withhold state income tax refunds from New Yorkers who filed in March for a few weeks.

In a sort of similar situation, Illinois is not paying its debts:

“In Illinois, legislators decided that the only way to balance the state’s 2009 budget was by not paying some $3.8 billion worth of bills until the next fiscal year. Not only does this mean quite a strain on vendors, it can cost the state more money in the future. When entities pay their bills late, vendors often add a premium-as much as 5 percent-to compensate for not getting paid promptly.

And not paying one’s bills is not the same as cutting spending.

Delaying tax refunds and the like is an accounting gimmick. It does not provide the state with any more money, but rather shifts the order of its bill payments. It helps balance the budget in a “fiscal year” way, not a “real world” way.

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