Don’t be like Chitsana Khounsamnane, a Nevada resident who owes California more than $3.5 million in back taxes. She had a lien filed against her in January of 2014 and so far hasn’t paid any of that liability. How do we know? She was first on California’s Top 500 Delinquent Taxpayers list for March.
Ready the pillories and hands to the tomatoes, taxpayers of America: here are your bad guys. At least 29 states publish delinquent taxpayer lists, hoping to both pressure scofflaws and scare other taxpayers into toeing the line. Unfortunately, according to tax attorney and former IRS agent Patrick Sheehan, it just doesn’t work.
“If you’ve been able to stay away from or avoid the tax collector to this point — or making the list of top offenders — shaming is probably of little value,” Sheehan said. “Most people that owe money to the government have other creditors, so frequently perhaps your house is in foreclosure [or] you’re losing your business. You’re pretty shamed by that point and one more shaming is probably not going to change your behavior.”
Not that there’s much embarrassment generated by an obscure list posted up on a revenue department website. “Seriously, if you had an exciting magazine that just came in the mail or a link to the delinquent taxpayer list, which one are you going to read?” Sheehan said.
What Does Work Instead?
New York’s most wanted clocks in with more than $22.7 million in unpaid personal income taxes, and its restaurants seem to have a shockingly hard time following the rules. Seeing his name in print might convince Samyak Veera, New York’s No. 1 offender, to pony up the dough — but probably not.
So what does work? According to Sheehan, levies. One of the reasons that the tax collector is such a feared creditor is his power to simply reach in and seize your assets without even taking you to court. “Levies area very effective enforcement tool. If you all of a sudden realize on payday that some or all of your money has been taken by force then you either endure the levy, which most people can’t, or you work out a deal with the government.” Either way, the tax collector gets his cash.
Still, lists like these, in which we learn that Master Touch Drywall of Washington state owes over $2 million in state taxes, raise another question. Why bother publishing a list instead of just slapping on a pair of handcuffs? The answer is: that might have happened too.
When it comes to taxes, criminal enforcement and collections are two different issues. In fact, any underpayment is technically a crime, whether it’s a CEO who bank-shots his 1040 into the trash or a little old lady who accidentally underpays $100. They’re both criminal violations of the tax code; it’s just that one is far more likely to draw enforcement than the other.
For members of the top delinquency lists, the very real threat of criminal prosecution doesn’t excuse any outstanding debts. Even in prison they still owe. So, like Thomas Wurzer’s $7.6 million debt to Wisconsin, the liabilities hang on.
Maybe There’s Some Harm, Too
These obscure lists might not serve much more than a prurient good (seriously, who wouldn’t take a peek hoping for a bit of celebrity spotting), but they can actually do real harm. According to Sheehan, tax scams operate at an unprecedented level fueled in no small part by an Internal Revenue Service starved for the resources to pursue con artists and answer questions from confused taxpayers. And these lists, with names, hometowns, precise debt totals and even, sometimes, warrant numbers, provide all of the ammunition a con artist could want.
“Shady tax representatives use that list in an attempt to contact those individuals hoping to either represent them or scam them,” Sheehan said. “We get those phone calls all the time, people call and pretend to be a government official. They say either you pay us now in cash or we’re going to send someone to arrest you, and normal law abiding people are fearful of that.”
Still, some states insist that publishing the names of delinquent taxpayers is an effective tool at rounding up payments from people who don’t want the publicity. In announcing the beginning of its program in 2009, Illinois said it triggered more than $15 million in back payments from people and companies eager to avoid publication.