According to the Department of Revenue, over $1.5 billion of that is collectable, meaning that the tax delinquents are known to the department. To place that in context, $1.5 billion is enough to cover the general fund costs of the Pennsylvania State Police and the Attorney General's Office for the next three and a half years.
Though this problem did not occur overnight, there is a solution -- implementation of a Tax Clearance System.
Maryland, Wisconsin, Minnesota, Oklahoma and Missouri have each established a Tax Clearance System in which persons or businesses seeking corporate or professional licenses or renewals are prevented from receiving the license or renewal until such time as they are current in their delinquent taxes.
The implementation of a similar program in Pennsylvania was studied by the Department of Revenue at the request of the Legislature over five years ago. Unfortunately, despite issuing a report that concluded that an integrated system across various state taxing and licensing agencies would not only pay for itself but would dramatically reduce delinquency rates, Harrisburg has failed to enact this common sense solution.
A Tax Clearance System would not apply to persons seeking a driver's license or a birth certificate. Rather, it would apply to applicants for various professional or businesses licenses associated with income generation, such as mortgage banker licenses, restaurant licenses, insurance adjuster licenses and dry cleaner permits. A majority of the uncollected tax receipts is attributed to delinquent corporate taxes, approximately $813 million. Delinquent sales and use taxes, and employer withholding taxes account for approximately $400 million of the total amount owed.
Pennsylvania already applies a similar system to applicants for casino licenses, lottery retailers and liquor licenses, which ensures a low delinquency rate within these industries.
According to the Department of Revenue study, a substantial collection rate is projected, in addition to a substantial decrease in delinquency rates. In fact, it was determined a Tax Clearance System would pay for itself within the first two years of its implementation. Coupled with a limited tax amnesty program as recently proposed in the state House, Pennsylvania can dramatically reverse its delinquency rate, collect a substantial portion of the amount owed, and ensure that everyone pays their fair share.
As working families are forced to make sacrifices in a difficult economy, so, too, must Harrisburg learn to do more with less. However, if state government is to operate more efficiently, the first step should be to improve its tax-collection methods. As someone with extensive experience in the private sector, I can assure you that any company with over $1.5 billion in uncollected receipts would not be in business long.
A Tax Clearance System is a reasonable and workable solution to an inefficient tax-collection system that rewards tax delinquents at the expense to those of us who pay our fair share.
Tom Knox is a Democrat running for governor of Penn sylvania. He was Philadelphi a's Deputy Mayor for the Office of Management and Produc tivity under then-Mayor Ed Rendell.