State tax scofflaws may be exposed

Granholm proposes public list to shame those who owe Michigan more than $100K into paying up.

Charlie Cain / The Detroit News

LANSING -- The state is considering a new weapon against tax deadbeats: a public list intended to humiliate -- and motivate -- companies and individuals who are at least $100,000 behind in state taxes.

The "cybershaming" of the worst tax scofflaws by prominently listing their names, addresses and tax debts on a state Web site could embarrass them into paying their debt, advocates believe. The list, if published today, would have 350 names.

Gov. Jennifer Granholm, who is asking lawmakers to allow the list, estimates the state could collect $5 million annually in past-due tax obligations. It's money the debt-ridden state can use to boost the treasury.

Faced with tough economic times, an estimated 18 states already have adopted the concept, and they are finding the public stockade is bringing in additional revenue. The Internet list is called "Debtor's Corner" in South Carolina and "DelinqNet" in Minnesota. Connecticut pioneered the approach in 1997 and has raked in about $200 million since.

The Michigan Department of Treasury is helping draft the legislation, which would loosen privacy laws that prevent the state from publicly identifying or talking about delinquent taxpayers.

"Our analysis shows that about 350 taxpayers -- both businesses and individuals -- would be above the $100,000 threshold," said Treasury spokesman Terry Stanton. He said the state doesn't know how much the top 350 owe, nor can it estimate the total dollar amount owed by all delinquent taxpayers.

Last year, the state collected about $7 billion in income taxes and another $2.9 billion in business taxes.

As much as she likes the idea of everyone paying a fair share of taxes, Taylor resident Terri Stapleton said this isn't the way to assure it.

"I believe it's an invasion of privacy, and there has to be a better way than to publicly shame people," said the 49-year-old computer operator and married mother of four. "There's too much room for error, and if you got on the list mistakenly, what kind of hoops would you have to go through to get off it? I don't like it at all."

Added Matt Marsden, a spokesman for Senate Majority Leader Mike Bishop, R-Rochester: "You have to be careful, and consideration must be given to the fact that a person is innocent until proven guilty. What if you make mistakes and some of those posted don't even owe taxes, yet they could have their personal or professional reputations damaged?

"Senator Bishop needs to see details in print before he could weigh in with support or opposition."

Concerns over privacy rights

The "Hall of Shame" raises questions about privacy rights, but states that have adopted it say reaction has been mostly positive.

"There was some, not a great deal, but some concern when we first put the list on the Internet in 2004, but that has really died down," said Charles Willey, spokesman for the Georgia Department of Revenue.

Georgia has recovered $57.8 million in unpaid taxes since it posted the list.

Georgia's list includes over 420,000 individuals and businesses that have a tax lien against them. The list is 900 pages long and shows the state is owed $1.4 billion in unpaid taxes, he said.

In compiling its first deadbeat list, Georgia tax officials discovered eight state lawmakers were in arrears. They all paid before the list was posted, but suffered embarrassment when a newspaper reported about their tax situations.

California, which began posting its top 250 tax deadbeats on a Web page in October 2007, collected $5.4 million in overdue taxes last year, said John Barrett, spokesman for the California Franchise Tax Board.

"It does bring in a nice chunk of change," he said of the list, which is updated annually.

O.J. Simpson owes $1.53M

At least one California deadbeat isn't likely to pay his debt soon, threat of public embarrassment or not.

No. 7 on the list, with a tax liability of $1.53 million, is Orenthal Simpson, better known as football Hall of Famer O.J. Simpson.

Simpson, acquitted in 1995 on charges he killed his ex-wife Nicole Brown and her friend Ron Goldman, was sentenced in December to at least nine years in prison for an armed robbery in a Las Vegas hotel room.

Using the Internet to publicly embarrass taxpayers is not viewed as wise policy by some.

"For one, governments certainly aren't perfect when it comes to gathering and reporting information. And tax authorities especially have been known to make mistakes," said Pete Sepp, spokesman for the Washington-based National Taxpayers Union, a nonprofit, nonpartisan watchdog group.

"And it would be pretty cold to just list people in the hall of shame who, through tough economic circumstances, have fallen behind in their taxes."

Seeing some upside

The Michigan Taxpayers Alliance hasn't taken a position on the proposal. But Leon Drolet, who heads the anti-tax group, said he could see some advantages in it.

"To a certain degree, there needs to be transparency when it comes to taxes so everyone can be assured that there is some equity in the system," Drolet said.

Stanton, with the Michigan Treasury, said the state would post names only after giving taxpayers ample opportunity to arrange a payment plan. He said the list would likely be updated regularly.

While Internet lists embarrass deadbeat taxpayers, they also point out the shortcomings of a state's tax collection efforts.

In Michigan, the state beefed up its collection detail in 2004 by adding 30 workers and bringing to 179 the number of state employees assigned the task of bringing taxpayers up to date.

Their techniques range from tapping an employee's paycheck to seizing business property.

In recent years, the state has collected an average of $300 million annually from taxpayers who were delinquent, Stanton said.

You can reach Charlie Cain at (517) 371-3660 or ccain@detnews.com.