Taxation is, in fact, the most difficult function of government and that against which their citizens are most apt to be refractory. — Thomas Jefferson
A recent issue of Governing magazine depicts the Mississippi State Tax Commission as “one of the most underfunded, underperforming and unlucky revenue agencies in the nation.”
“The state has cut the commission’s budget about 5% in each of the past two years — on top of a 10% staffing cut in the early 1990s,” Governing said in a recent article that evaluated the tax structures and management of the 50 states. “There currently are 88 vacancies that have gone unfilled for lack of funds, including 22 auditing positions.”
The article concludes that Mississippi isn’t alone, and that the vast majority of state tax systems are inadequate for the task of funding a 21st-century government. “In addition, at a time when states are desperate to collect every dime they’re owed, many are short-changing their tax-collection departments, cutting revenue agency budgets with a heavy hand,” Governing said.
Ed Buelow, chairman of the Mississippi Tax Commission, agrees the agency is underfunded. But he doesn’t go along with it being underperforming and unlucky. He says that when he was interviewed for the article, the thrust of what was discussed was lack of proper funding.
“The gist was we were not being funded properly, and therefore it was difficult for us to do our job,” Buelow said. “We have an inordinate number of vacant positions because I don’t have funds to hire complete staff. The issue of under-performing never came up. If it had, I would have said the State of Mississippi probably has the lowest accounts receivable of any state in union. We collect the taxes that are owed. Maine collects about the same amount of taxes as us, and has over $100 million in accounts receivable. We are way down to a few million that we have accounted for and are trying to collect. I don’t think in any way the staff is underperforming based on the numbers we have.”
Buelow said the staff has done particularly well considering the fact that its budget cuts have been going on for a longer period of time than most other states. Other states have had budgets cut in the past couple of years while Mississippi’s cuts have gone on for nearly a decade. Funding went down 2% each year for five years in a row.
“That to me is one way to try to reduce the size of government, and I applaud that,” Buelow said. “But in the case of an agency like the tax commission, in the past 10-year period the number of filings that we have has doubled.”
Those filings increased because of the growth of the numbers of people in Mississippi paying taxes. But while the workload has increased significantly, funding has declined.
“So I would not agree with the comment we are underperforming,” Buelow said. “I think we are performing as well as can be expected with the funding we have. I’m not fussing too bad with not being funded properly with the situation we have in this state. But it is difficult for my staff to perform the processing in the same timely manner as 10 years ago. I have twice as many filings, and 15%-20% less people.”
Buelow said not only have income tax filings increased, but so have all other types of taxes such as sales taxes, tobacco taxes and insurance premium taxes.
“We are having tremendous increases in the number of filings in each of the taxes,” Buelow said. “That requires more time and people. We will do it. It will get done. It will take us longer to do it, is all.”
Lester Herrington, who recently retired as deputy commissioner of the Mississippi Tax Commission and works as a revenue specialist for the Mississippi Legislature, agrees that while lack of proper funding hampers the commission, the state has a very favorable delinquency ratio.
“The amount of unpaid taxes compared to the total was a very insignificant percentage, particularly compared to other states I am familiar with,” Herrington said. “I can assure you we have an excellent ratio of delinquencies compared to other states. The other measure that I would have thought they would look at, too, would have to do with the results from audits, which would show whether or not we are getting compliance.
“We can collect what people say they owe, but then we have to see if they are sending what they are supposed to. We have an excellent audit program. We audit a greater percentage of taxpayers and tax dollars than 45 other states.”
Herrington said while it is true that not all taxes owed to the state are being paid, that is also true in all other states.
“But where there is estimated liability of taxes owed, Mississippi’s delinquency in that area is very small in terms of total dollars,” he said.
Herrington points out that Mississippi is far from being alone having budget problems.
“Most of the other states have been facing the same type of budget difficulties we have had here,” he said. “I think what happened, we had a very positive economy for 10 to 12 years. As a result of those increasing taxes, people throughout the country put on new programs. Government spending increased substantially. Then when we hit a downturn it caused substantial budget problems. We have a significant budget problem in Mississippi, but not anything compared to some of the folks I have talked to around the country.”
Alice Gorman, who followed Herrington as deputy commissioner of the Mississippi Tax Commission, said failing to adequately fund the tax commission could be short sighted.
“We do not have enough funding to fill all of our positions,” Gorman said. “We have vacant auditor positions which means we don’t have auditors out there enforcing compliance. We also have a restricted travel budget this year and have for the past couple of years. So auditors are not able to travel as much as we would like to see. Each of the auditors is usually accessing $500,000 in tax per year. If they aren’t out there making those assessments, that money could potentially go uncollected.”
Often what audits reveal isn’t cheating or fraud, but just errors. Considering that there are 75 different types of taxes and fees collected, it isn’t surprising the some taxpayers aren’t in compliance. Some audits can be done in house, but for large audits the auditors must visit the home office of the taxpayer. If they are based in Mississippi, it can be done in state. If it is a multinational corporation with headquarters out of state, the auditors often have to travel to the home office outside of the state. Restricted travel budgets make that difficult.
“Our job is to collect the right amount of tax from everybody,” Gorman said. “We just need to be able to do our jobs. If some taxpayers are not paying what they owe, other taxpayers may have to pay more as a result. We want to make sure everyone is paying equitably what is due from them, not a cent more but not a cent less.”
Gorman said the tax commission is continuing to upgrade its technology.
“Anything we can do to improve service and technology helps, but that takes funding also,” Gorman said.
Governing gave Mississippi a C+ for overall government performance. The magazine gave the state a B in financial management, a C in capital management, a B- in human resources, a D+ in managing for results and a C+ for information technology.
Contact MBJ contributing writer Becky Gillette at firstname.lastname@example.org.