Fragmented tax-collection systems should be targeted for cost savings
A small sign of hope emerged in Harrisburg last week that could save taxpayers millions, if not hundreds of millions of dollars. The issue is tax collection and bringing changes to the state's antiquated and fragmented tax-collection system for earned-income tax and, eventually, property tax.
The Senate Finance Committee approved a bill to consolidate local collection of earned-income taxes across the state. The bill would shift the collection of $2 billion in earned-income tax revenue from 560 earned-income tax collectors across the state to just 66, one per county, except in Philadelphia, where collection already is centralized.
When the collection of property taxes is examined, the potential savings are astounding. With about 2,500 elected tax collectors across the state, Pennsylvania reportedly has more tax collectors than all other states combined.
A report presented to the state legislature last week suggested that by centralizing and streamlining the collection of earned-income taxes across the state, school districts and townships could save about $100 million a year. That level of savings from the implementation of a more efficient collection of $2 billion of earned-income taxes suggests that centralizing tax collection can reduce costs by about 6 percent.
If centralized tax collection can save that percentage of the $2 billion in earned-income taxes billed, it can be presumed that it would save a similar percentage of the nearly $20 billion in property tax bills sent out across the state, which could amount to hundreds of millions of dollars in annual savings for school districts and counties.
It's been widely known for years that consolidation and modernization of tax collection would save taxpayers across the state billions of dollars within a few years.
State lawmakers have been reluctant to — or unable to — pass a consolidated tax-collection plan in the past due to the political influence of the elected tax collectors. But it's now past time for the interests of millions of taxpayers to trump the interests of 2,500 tax collectors.
The time has come for voters to demand changes to a system that leaks hundreds of millions of dollars a year due to inefficiencies. It's not the fault of the elected tax collectors, it's just that the system is inefficient, out of date and costly.
Payers of property taxes across the state are at their limits — as evidenced by more vocal complaints over ever-increasing county and school district taxes. The need for cost savings in tax collection also is found in reports of more school boards determined to hold the budget line, despite strike threats by teachers unions.
School districts and municipalities across the state owe it to taxpayers to explore the potential savings in changing the way taxes are collected.
The Senate committee's approval of a centralized, county-based collection system for earned income taxes is just a first step. County governments and school boards across the state should do their own studies to estimate the savings to be found in centralized tax-collection systems.
There was a time, when horse-drawn buggies filled the roads, when it might have made sense to have more than 2,000 tax collectors across the state. Now, however, with the possibility of centralized collection systems based in 67 county treasurers' offices, there is no justification for maintaining the current antiquated — and costly — system in the commonwealth.
At a time when local governments and school districts should be looking at — and justifying — every penny spent of taxpayers' funds, there can be no excuse for not reclaiming the money lost due to tax-collection inefficiencies. The extra costs incurred by inefficient tax collection are unnecessary and avoidable.
School directors and county commissioners owe it to struggling taxpayers to find the most efficient and cost-effective way to collect taxes. The current outdated and inefficient system is clearly not the answer. Ignoring that fact is an insult — and an injury — to taxpayers.
