Analysis: Mo. seeks to use banks to get overdue taxes

JEFFERSON CITY, Mo. -- Missourians with overdue taxes may soon have more difficulty avoiding payment. Gov. Jay Nixon is a proposing a law that would let the state seize delinquent taxes directly from people's bank accounts.

The new powers are included among eight specific proposals Nixon has embraced for enhancing the Department of Revenue's ability to track down tax deadbeats and collect what the state is owed.

He is banking first that the legislature will approve the changes to state tax laws. Then he is banking that those changes will generate $22 million next year to help balance the budget and an additional $49 million in the 2012 fiscal year.

The tax-collection changes are one of several ways in which Nixon's proposed $23.9 billion operating budget depends upon future legislative actions. He is counting on Congress to come through with hundreds of millions of dollars of additional stimulus money. He is assuming state legislators will change Medicaid laws. And he is planning on Missouri lawmakers letting the state sweep millions of dollars of unused money from various special state funds into Missouri's general revenue pool.

"There's a good amount of money [in Nixon[']s budget] that is not really there at this time," Senate Appropriations Committee chairman Rob Mayer, R-Dexter, said during a budget briefing last week.

Many lawmakers still are not fully aware of the details of Nixon's proposals to increase state revenue, particularly those dealing with tax collections.

Senate Ways and Means Committee chairman Carl Vogel, R-Jefferson City, said Friday he plans to sponsor legislation making Nixon's tax collection changes. But Vogel acknowledged he wasn't familiar with the provision allowing the state to transfer money out of people's bank accounts.

Unbeknownst perhaps to many Missourians, the Department of Social Services already has a similar power to seize money from people's bank accounts to collect overdue child support. That program works by periodically matching lists of bank account holders with a list of people behind on their child support payments. The banks participate on a voluntary basis.

Missouri sends its list of people with overdue child support to the federal government, which matches it with accounts held in banks that operate in multiple states. For banks that operate only in Missouri, the department contracts with Rhode Island to handle the bank-account matching, said Department of Social Services spokesman Scott Rowson.

But "it's really not a primary tool of ours," Rowson added.

Bank account transfers were used in about 7,000 of the agency's roughly 300,000 child support cases in the 2009 fiscal year, he said.

Department of Revenue spokesman Ted Farnen said the agency hopes to piggyback its tax-collection efforts on those of the child support program -- using the same lists from the same voluntarily participating banks.

According to the American Bankers Association, similar state tax-collecting arrangements exist with banks in nine states -- Kentucky, Indiana, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York and Wisconsin.

The Missouri Bankers Association agreed not oppose the legislation after learning in a Thursday meeting with Nixon's administration that it would remain a voluntary program, said Bill Ratliff, the group's executive vice president.

But that's not to say the proposal is completely worry-free for banks or their customers.

"A lot of our bankers think they're becoming the policemen for money laundering and drug enforcement and terrorism, and it just gets to be too much," Ratliff said.

Now banks would be aiding in another government function -- tax collection.

"We're not too keen on informing on our customers," Ratliff said. "We realize the job of the Revenue Department is to collect taxes. The job of banks is to provide banking services to our customers, not to turn them in."

Mayer and House Budget Committee Chairman Allen Icet, R-Wildwood, both expressed some qualms about making banks part of Missouri's tax-collection process. But they also said Nixon's proposed tax-enforcement changes are likely to move forward.

"There are some ideas that do make sense," said Icet, R-Wildwood. "There are some we probably need to discuss a little more to understand the dynamics," he added, citing the banking provision as a prime example.