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From Governing’s
So it goes at the Mississippi Tax Commission — one of the most underfunded, underperforming and unlucky revenue agencies in the nation. The state has cut the commission’s budget about 5 percent in each of the past two years — on top of a 10 percent staffing cut in the early 1990s. There currently are 88 vacancies that have gone unfilled for lack of funds, including 22 auditing positions. “When I can’t do audits,” Buelow says, “I can’t make collections. I estimate that we collect 10 to 20 percent less than we should.”
In other states, revenue departments compensate for staffing cuts with technology. Mississippi has not been able to do that. In 1994, it signed a contract with American Management Systems for an integrated tax information system. Five years later, with nothing installed effectively, the state sued AMS for breach of contract. The case was eventually settled out of court for $185 million, but only about 16 percent of this payment reached the Tax Commission. The rest was dumped into the general fund. You might anticipate that the Tax Commission would at least put its share of the settlement — about $30 million — into new technology. And it did ... sort of. In Mississippi, the government is the liquor wholesaler and the Tax Commission is in charge of alcoholic beverages. The state levies a 27.5 percent markup, making the arrangement extremely profitable. So, the decision was made to put a good chunk of the $30 million into an expansion and new software for the liquor warehouse. Other revenue-collecting divisions were required to wait in line a while longer. Now, the Tax Commission is trying to build an integrated information system in-house, with the first stage scheduled for completion this fall. In the meantime, Mississippi is running on its old systems, with no data mining, no document scanning and very limited electronic filing. “It’s just about short of doing it by hand,” Buelow says. Not surprisingly, the commission and the legislature don’t have the best relationship in the world. Last March, Buelow told legislators that without money to hire temporary employees to open mail, tax refunds would be delayed up to six months. An extra $250,000 was found. But the matter didn’t rest there. Several legislators and the governor publicly accused Buelow — who has been appointed for a second six-year term — of mismanagement, for failing to run his agency within its allotted budget. Wherever the fault lies, the state is certainly in no position to forgo revenues it might be able to collect. For the 2004 fiscal year, Mississippi is expecting a shortfall of at least $500 million, or 14 percent of the general fund. And, as University of Mississippi political scientist Joe Parker puts it, “bubble gum and bailing wire” balanced the budget this year. For example, the state moved up the deadline for July sales tax payments to incorporate them into the 2002 fiscal year. And although state law forbids touching the principal of the tobacco settlement fund, the legislature “intercepted” tobacco revenue, on the argument that if it hadn’t actually been deposited yet, it wasn’t really part of the fund. Mississippi’s budget troubles are, to some degree, a result of over-expectations for the economic boom of the 1990s. Revenue estimates unrealistically reasoned that ballooning income would indefinitely support new spending on teacher salaries, mental health and prisons. When the balloon popped, the state was caught unprepared. This artificial sense of affluence was buttressed by the state’s newest source of revenue: gambling. When casinos were first proposed in Mississippi, in the early 1990s, they were projected to generate around $10 million a year. For most of the decade, they delivered much more, eventually comprising about 5 percent of the state’s general fund. Nevertheless, growth flattened while spending didn’t. Budget and administrative problems aside, Mississippi’s actual tax structure isn’t bad. The state levies a 7 percent statewide sales tax, which is high, but with few exceptions, cities and counties do not have the power to levy local-option add-ons, so 7 percent is as bad as it usually gets. Taking state and local sales taxes together, the burden is lower for Mississippi citizens than it is for most residents of neighboring states. The tax is also relatively broad, covering services as diverse as dry cleaning, custom software and construction contract profits. Mississippi’s income tax is simple and relatively low, with a top marginal bracket of 5 percent and high deduction and exemption levels. A Mississippi family of four making $19,600 doesn’t pay any income tax at all. The one constant complaint is about the personal property tax on automobiles. The car tax, added on to the cost of registration renewal, applies county millage rates to 30 percent of the value of the car, three times more than the value that is assessed on homes. Copyright © 2003, Congressional Quarterly, Inc. Reproduction in any form without the written permission of the publisher is prohibited. Governing, City & State and Governing.com are registered trademarks of Congressional Quarterly, Inc. |
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d Buelow chairs the Mississippi Tax Commission. Periodically, a frustrated taxpayer will reach him with a tale of prolonged hours on hold and uninterested or misinformed customer service reps. He’ll write down the taxpayer’s question. Then he’ll walk directly to the customer service people to try to get an answer. Why doesn’t he just pick up the phone and call? “I’d get put on hold the same as they do,” he explains.