Economic Development

Axing the Taxman

Tax collectors might not be the most popular government officials, but as Arizona recently discovered, they might be the very worst to cut in a...
by | March 31, 2010
 

Tax collectors might not be the most popular government officials, but as Arizona recently discovered, they might be the very worst to cut in a fiscal crisis.

Beset by one of the nation's worst budget shortfalls, Arizona forced every state agency to cut its budget in early 2009. That included the state's Department of Revenue, which is charged with collecting taxes. Revenue officials complained that the move would be counterproductive, but to no avail. "We explained that if we lost auditors and collectors," says Anthony Forschino, assistant director of the Department of Revenue, "that there would be less auditing and less collecting."

That's what happened. The department nixed 115 auditors and 93 collectors, and lost revenue is estimated at perhaps $100 million in 2009, far more than the $25.6 million the state saved. Forschino estimates that each auditor brings in $400,000 a year and each collector brings in $800,000--far more than they're paid in salary.

Arizona isn't the only state to follow this course. In California, Gov. Arnold Schwarzenegger pushed forward with furloughs to the Franchise Tax Board, despite complaints. The state's Senate Office of Oversight and Outcomes released a report estimating that the furloughs are costing the state $7 for every $1 saved in payroll expenses.

In contrast, lawmakers in other places, such as Georgia, are talking about adding tax collectors in response to the fiscal crisis. And now, elected officials in Arizona are reversing course, having already brought some collectors back temporarily. Even though Arizona's fiscal problems haven't abated, Gov. Jan Brewer is proposing a larger budget for the department so it can reinstate more auditors and collectors on a permanent basis.

Besides being a testament to the importance of tax collectors, the story out of Arizona reflects the need for carefully conceived cutbacks. Across-the-board budget cuts can seem fair or convenient, but they rarely make the most fiscal sense.

Josh Goodman
Josh Goodman  |  Former Staff Writer
mailbox@governing.com

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