(AP) – Wisconsin taxpayers would face more audits and revenue agents would pursue more of those who owe back taxes under a plan approved Tuesday to help close the state’s budget shortfall.
The Joint Finance Committee voted 15-0, without any debate, to restore $11.8 million to the Department of Revenue’s budget that Gov. Jim Doyle had proposed cutting over the next two years.
The committee told the department to use the money to increase enforcement of tax laws, including conducting more audits and tracking down delinquent taxpayers who collectively owe more than $1 billion. The department could hire 31 more employees, including tax agents and auditors.
The Legislative Fiscal Bureau estimates the effort could bring in $70 million in revenue in the next two years, making a small dent in the $6.6 billion budget shortfall the state faces through June 30, 2011. The plan needs approval from the Legislature and Doyle to take effect.
The move comes as Democrats who control the Legislature consider Doyle’s plans to slash state spending, lay off up to 1,100 state workers and order 16 days of furloughs over the next two years.
Doyle announced those plans last week amid plummeting state tax collections caused by the recession and the state’s rising unemployment rate.
Sen. Mark Miller, D-Monona, and co-chair of the finance committee, said lawmakers were considering spending cuts, unspecified tax increases and additional borrowing to close the shortfall. Lawmakers on the budget committee will spend the next week trying to come up with a specific plan before discussing it publicly next week, he said.
Senate President Fred Risser, D-Madison, had urged the committee to approve the hiring of additional tax auditors and agents to bring in more revenue.
“Things are very difficult for state residents and anything we can do to bring in more revenue while easing the burden on honest taxpayers is worth pursing,” Risser said in a statement.
The goal of the tax collection plan is to reduce the “tax gap” – the difference between taxes owed and those paid voluntarily on time. The plan would allow the revenue department to catch more individuals and businesses who underreport their income or make other mistakes that wrongly reduce their taxes.
Between 1 percent and 3 percent of Wisconsin taxpayers are selected for random audits every year to determine their tax returns accuracy. Tax auditors bring in between $275,000 and $1.9 million, depending on their assignments.
While many taxpayers who are audited would pay additional taxes, others would get refunds. All of those who are targeted could face additional costs complying with audits, even if they paid the correct amounts.
Meanwhile, the Department of Revenue reports that delinquent taxes owed by corporations and individuals shot up to more than $1 billion last year. About half of that is not considered collectable because taxpayers died, went bankrupt or for other reasons. But additional employees could help the department collect more money.
Revenue agents assigned to track down delinquent taxpayers generate $1.1 million annually on average. They can call delinquent taxpayers, seize their property, garnish their income and take other steps to get money.
