By Joshua Benton
Blade Staff Writer
Toledo tax evaders, you’ve been put on notice: Pay up, or the city will use a high-tech tool to get you.
If city council approves the 1999 budget Tuesday, as expected, the city’s taxation division will receive $40,000 for a software package officials say will help them more easily find those skipping out on local income tax – and generate more for the city’s coffers.
“We’re not collecting as much money as we’d like to,” Gene Borton, the city’s tax commissioner, said. “And we think this will help.”
The city has a 2.25 per cent payroll tax, which is supposed to be deducted from paychecks by employers. But some residents and businesses don’t own up to their full income, failing to include items like rental income or self-employment revenue. Mr. Borton estimates that between 5 and 10 per cent of Toledoans don’t pay their full city tax, or pay none at all.
That total probably runs into the millions of dollars, he said, although there’s no way to be sure.
One of the easiest ways to catch those scofflaws is to compare the Internal Revenue Service’s records against the city’s. If someone filed a federal return but didn’t pay any Toledo tax, it’s a red flag, Mr. Borton said.
Beginning in 1992, the IRS sent the city massive amounts of computerized data to check against its own records.
Initially, the city found hundreds of conflicts between the two sets of records. As a result of the checks, the city collected more than $1 million in delinquent taxes in 1994, Mr. Borton said.
But about three years ago, the IRS began sending the city its data in an unwieldy, complex format that couldn’t be analyzed easily.
Last year, because of technical difficulties, the city was only able to cross-check about 30 per cent of taxpayers’ records. Each one had to be printed out and hand-checked by employees.
That low-tech method brought in only about $600,000 in unpaid taxes, Mr. Borton said.
The proposed software system will allow the cross-checking be done by a computer instead of employees.
The software’s maker, Data Compression Technology of Minneapolis, has sold its program to six states and three cities, including Cleveland, which will start using it later this year, according to Don Pehta, the company’s vice president for marketing.
The program works by compressing the data to less than a tenth of its size, allowing tax record checks to be done much more quickly and efficiently, he said.
Mr. Borton was hesitant to estimate how much additional revenue the city would stand to gain from using the software package, but he said he believed the city probably would return to the $1 million-a-year totals, and perhaps generate significantly more – an important possibility for a city facing tight budgets for at least the next several years.
Mr. Pehta said that the average government using the software has seen its delinquent tax revenues go up by about 24 per cent.
One of the firm’s clients discovered one $600,000 unpaid tax bill through their software, Mr. Pehta said. Other jurisdictions have “paid for the software many times over,” he said.
Barring a surprise removal of the funding from this year’s budget, Mr. Borton said he hoped to have the software installed by June, in time for use on this fall’s IRS data.