The Arkansas state legislature is in session, and its members are trying to figure out how to pay for court-ordered education reform and school improvements, as well as Governor Huckabee’s health, highway and higher education priorities — all without raising taxes.
This may be a good time to point out that they could create $35 million in additional annual revenue simply by changing an outdated method of collecting taxes.
It’s not a romantic subject, but it’s fairly easy to understand. Most of us pay personal property taxes on cars and real estate. But Arkansas is one of the only states in the nation that sends a tax bill the year after property is assessed. For instance, if you buy a car this month (January 2005), you won’t be billed until March 2006, and your tax payment is not due until October 2006.
That sounds like a nice deal for us, but it defeats the point of the tax.
“By that time, you could have sold the car, wrecked the car, died, or moved out of state,” said Debra Buckner, the Pulaski County Treasurer.
She thinks it would make more sense to assess and collect the tax in the same year, with a shorter payment window. That is the way it is done in most other places, including neighboring Louisiana, Mississippi, Missouri, Oklahoma, and Tennessee. In those states, you are billed near the end of the calendar year, and you have either 30 or 60 days to pay. That cuts down on confusion and late payments.
In contrast, Buck-ner says delinquent taxes are a bigger problem in Arkansas, and her office must devote a significant amount of resources to tracking down and collecting from tax evaders.
For evidence of the severe problem, check the Pulaski County website, which lists running totals of delinquent taxes. On Jan. 24, there were more than $17 million in unpaid taxes, and that is only one county after 90 days of aggressive collection attempts. So not only is the government losing money it is owed, but it also must spend more money on administrative expenses just to get what it can.
Almost anyone who studies this issue agrees that the system should be reformed. The problem is that the Arkansas tax laws are extremely complicated, and many have roots in the state Constitution, which means changes have to be approved at the ballot box. On an issue as volatile as taxes, you can’t count on people to see the merits of efficiency, even if they won’t be paying any more than they would otherwise.
However, the desperate search for additional revenue may lead the legislature to finally take the time and energy to tinker with the works. Sen. Dave Bisbee says he expects to introduce a proposal during this session “as soon as we can get the lawyers agreeing how to do it.” His goal is to simplify the system, so that the average Arkansan doesn’t get confused about which assessment to pay each year. To do that, Bisbee says that 29 statutes need to be amended, and two constitutional amendments (59 and 79) may require changes as well.
Bisbee has allies in Carol Ward, the president of the Arkansas Collectors Association, and Sen. Jim Argue, who likes the idea of enhancing revenues to avoid an increase in sales or income tax rates, which are already among the highest in the nation. He points out that Arkansas is ranked 49th in per capita property taxes, and he would like to see the state’s tax burden shift in that direction. A good start would be to implement a more efficient system for collecting the relatively small amount that is assessed.
The biggest challenge will be the transition to a new collection method. State law prohibits paying two years’ worth of taxes in one year, so we can’t just immediately switch to a new system. (For instance, because we pay our 2004 assessment in 2005, we could not also pay our 2005 assessment under a new system imposed this year.)
Still, Buckner says that other states have figured out how to make the change, and a gradual process of closing the billing and payment windows would eventually get us where we need to be.
According to Argue and Bisbee, the end result would be an extra $35 million a year without raising taxes, which is worth the hard thinking. The money goes directly into county coffers, which fund the bulk of public education.
It isn’t glamorous to turn over mattresses and sofa cushions looking for spare change. But that’s what you do when you’re flat broke and your bills are due.