How Bureaucrats Waste Our Money
This morning the Times Union talks about "tax cheats" in its top front-page article. The content provides a great way of showing how bureaucrats waste our money.
It seems that NY's Department of Taxation and Finance is cracking down on abuse of tax credits. Seems like a good thing, right? I don't mean to criticize this too harshly, but the math in the article provokes concern.
They are doubling the number of "reviews" of people who file for certain tax credits. The article quotes a "spokesman." I digress, but why do they have to have spokesmen? Can't the regular guys who do the work take a second to talk to the media? I'm guessing it's because spokesmen are people who are good at twisting the numbers in a way that looks better.
This year they are targeting 147,000 filers, compared to 70,000 last year. They claim that this has already saved the state $112 million in "potentially fraudulent or undeserved credits and refunds," and that they hope it will save $170 million in total.
Does this mean that the increase is saving all these millions, or is it the total number of reviews. I'll go with my skeptical guess that it's for the whole shebang. So the average review saves the state about $1000.
But there's more to the story. Why did they use the word "potentially"? That is actually answered in the article if you're looking for it. If they challenge your tax credit, you have 30 days to respond with documentation. Some innocent people won't respond within 30 days, and they'll lose their deserved tax credit. Also, the review process takes time and delays refunds, so those who are entitled to their tax credits won't get their refund as early. This means the taxpayer loses either on interest they have to pay to compensate for the delayed refund, or on interest they won't earn.
Another important thing is not reported. How much does it cost to do the average review? If it's only $10/review, then the net is $990 per review and that makes a lot of sense. But I can't imagine any state agency doing anything that cheap. The article provides no analysis of the cost of these reviews. How do we know that the reviews don't cost more than $1000 apiece on average? If they do, then this policy actually loses money. And don't forget the cost to the taxpayer for a tax lawyer or accountant to assist with the audit.
The lesson here is that you should never take a spokesperson at their word. You have to challenge their numbers and ask the tough questions. Bureaucrats are quick to claim credit for what their agencies do. Sometimes it is deserved, but often it's a lot of fluff.
Imagine if our governments focused on cutting spending. They would waste a lot less of our money, and then people would have less incentive to dodge taxes. Then we could spend less money trying to catch the cheaters (and screwing the innocent). A virtuous cycle. I wonder if this could be put to verse or song.
It seems that NY's Department of Taxation and Finance is cracking down on abuse of tax credits. Seems like a good thing, right? I don't mean to criticize this too harshly, but the math in the article provokes concern.
They are doubling the number of "reviews" of people who file for certain tax credits. The article quotes a "spokesman." I digress, but why do they have to have spokesmen? Can't the regular guys who do the work take a second to talk to the media? I'm guessing it's because spokesmen are people who are good at twisting the numbers in a way that looks better.
This year they are targeting 147,000 filers, compared to 70,000 last year. They claim that this has already saved the state $112 million in "potentially fraudulent or undeserved credits and refunds," and that they hope it will save $170 million in total.
Does this mean that the increase is saving all these millions, or is it the total number of reviews. I'll go with my skeptical guess that it's for the whole shebang. So the average review saves the state about $1000.
But there's more to the story. Why did they use the word "potentially"? That is actually answered in the article if you're looking for it. If they challenge your tax credit, you have 30 days to respond with documentation. Some innocent people won't respond within 30 days, and they'll lose their deserved tax credit. Also, the review process takes time and delays refunds, so those who are entitled to their tax credits won't get their refund as early. This means the taxpayer loses either on interest they have to pay to compensate for the delayed refund, or on interest they won't earn.
Another important thing is not reported. How much does it cost to do the average review? If it's only $10/review, then the net is $990 per review and that makes a lot of sense. But I can't imagine any state agency doing anything that cheap. The article provides no analysis of the cost of these reviews. How do we know that the reviews don't cost more than $1000 apiece on average? If they do, then this policy actually loses money. And don't forget the cost to the taxpayer for a tax lawyer or accountant to assist with the audit.
The lesson here is that you should never take a spokesperson at their word. You have to challenge their numbers and ask the tough questions. Bureaucrats are quick to claim credit for what their agencies do. Sometimes it is deserved, but often it's a lot of fluff.
Imagine if our governments focused on cutting spending. They would waste a lot less of our money, and then people would have less incentive to dodge taxes. Then we could spend less money trying to catch the cheaters (and screwing the innocent). A virtuous cycle. I wonder if this could be put to verse or song.
posted by Albany Lawyer at 7:42 AM
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