California says pay up
April 20, 2011
California is trying to shame 250 businesses and people into paying their delinquent taxes, including two individuals from the Central Coast who combined owe more than $1.1 million.
As part of its collection tactic, the state posted its annual list last week of delinquent taxpayers.
Every debtor on this year’s list owes more than $300,000 in personal or corporate income tax. Dozens owe more than $1 million in outstanding taxes and the list topper exceeds $14 million.
Among the 250 people and businesses that owe the most in back taxes, the State of California Franchise Tax Board has filed tax liens against Nancy Perea of Santa Maria for $781,063 and Kenny Seguine of Nipomo for $360,525. The liens were filed in 2007 and 2009, and as of last Thursday, the state had yet to collect.
The local tax delinquents are contributors to California’s estimated $6.5 billion tax gap which is the difference between taxes owed and taxes actually paid. It’s a gap the state says it is working hard to close.
Since the latest directory was posted last week, dozens have settled their debt to the state in order to get their name removed from the proverbial naughty list. But it has only made a small dent in the tax burden which as of April 14 amounted to $193,411,700.
Fearing the public outing, several debtors came forward after the tax board mailed out a warning letter earlier this year netting the state more than $13 million. The tax board has collected more than $78 million since the list was first published in 2007.
The board says that when people “do not pay their fair share, it places an unfair burden on those who do. Closing the tax gap is in the best interest of all Californians.”
Nearly 90 percent of taxpayers typically pay the taxes they owe, but more and more people are filing without contributing their part.
In 2008, the most recent year for which information is available, 611,318 taxpayers reported incomes of $200,000 or more.
However, 2,431 of these households paid no California personal income tax, according to the board’s 2009 annual report. It’s a figure that has more than quadrupled in just over a decade, rising from a mere 579 households in 1997.
A further sting to the massive revenue shortfall is the fact that California is also losing out on more than $1 billion each year in unpaid sales taxes on goods purchased from outside the state where some online retailers refuse to collect the taxes required, according to the Board of Equalization.
The California Budget Project says that most people are not aware they owe California sales tax for these online purchases. Regardless they are still legally obligated to pay.
In 2010, only 61,000 out of 16.9 million households paid the required tax when they filed California personal income returns, according to the Board of Equalization’s February 2011 Economic Perspective. The board projects unpaid retail taxes will cost the state more than $1.1 billion in 2010-2011.