The current initiative by the state Department of Taxation to crack down on tax fraud has the best interests of the state at its core for the long haul, but in the immediate term there’s a problem that must be addressed.
And that’s the pocketbooks of the taxpayers who are bearing their fair share of government’s financial burden.
For the second year running, there will be a slowdown in delivery of checks to those anticipating state tax refunds.
State Tax Director Maria Zielinski has said it will again take up to 16 weeks after returns are filed this year to process refund payments.
The reason she cited is the pursuit of fraudsters. Last year’s efforts by the state to filter tax returns ferreted out about $32 million in fraudulent findings, she said, so the crackdown seems worthwhile.
But the ones being punished in the meantime are the ones owed a legitimate refund, and the department should do more to soften the blow on them.
At a budget briefing on Monday, Zielinski told a joint session of the Senate Ways and Means and House Finance committees that roughly 80 percent of the refunds should be processed sooner than 16 weeks.
In addition, the department website includes the following advisory: “We encourage taxpayers who are expecting refunds to file early. By filing early, taxpayers are more likely to receive their refund quicker. Interest may be paid if your refund is not issued by July 20, 2016.”
That’s prudent advice, but as reassurance, it doesn’t go far enough.
State Rep. Isaac Choy, who formerly chaired the state Tax Review Commission, offered a suggestion: The department should waive penalties for taxpayers who under-withhold or underestimate their estimated quarterly tax payments.
That deserves serious consideration. If the state cannot meet its responsibility to return money owed to taxpayers in a timely manner, the public deserves a means to protect its own interests.
Ensuring that they don’t end up waiting for their own money back seems a reasonable response.
This is especially true given that this problem stems in part from the state’s outdated digital bookkeeping system, and that it could persist for some time.
Zielinski, who acknowledged that the delays in processing returns were “unacceptable,” said the delay issue would be fixed by this year.
That’s a worthy goal, but the public can be excused for raised eyebrows.
The tax department — like agencies throughout the state — has been dealing with the repercussions of informational technology shortcomings for years.
At the end of its last “upgrade,” the state was out $87.5 million — without much of a system to show for it.
Now another modernization enterprise is underway, something the administration of Gov.
David Ige has touted as a major priority.
However encouraging that is, the effort is being done in phases, Zielinski said. The part that includes income tax returns is not scheduled to be implemented for two more years.
That timetable really should be accelerated, if at all possible, with the interests of the state taxpayer moving up in line.
For its part, lawmakers ought to support, to some extent, the department’s plans to reorganize and form its investigation branch.
Making the case for its full request of 17 new positions, however, will be a heavy lift during a session with so many competing budgetary demands.
Part of the persuasion for added resources will involve convincing legislators that tax officials are doing their utmost for the taxpayers — at current funding levels.
Displayed prominently on the department’s website, as well as in its budget presentation, is the statement of its mission, “to administer the tax laws for the State of Hawaii in a consistent, uniform and fair manner.”
Rectifying the problem with tax refunds — a truly basic obligation for such an agency — is essential to fulfillment of that mission.
