When it comes to tax collections state policymakers are constantly faced with hard choices about what’s fair and effective for collecting taxes from fellow citizens. These tough decisions become complicated when you’re talking about collecting overdue tax bills. One “interesting” measure our legislature has deemed appropriate for getting the attention of Louisiana taxpayers who owe back taxes is the suspension of driver’s licenses.
If you owe more than $1,000.00 in state taxes the Louisiana Department of Revenue (LDR) can have your driver’s license suspended. Per current LDR policy, there are only two practical measures for having it reinstated: 1) pay the entire tax bill; or 2) make a down-payment of 20% of your total tax bill and agree to the customary 12- or 24-month payment plan. There are no hardship provisions or considerations given for individual circumstances which could justify bending the suspension rule.
Unfortunately, this collection tool and blanket application in every circumstance often cuts deep for many Louisianans who face their own catastrophic circumstances and financial woes. Simply put, some taxpayers can’t afford a 20% down-payment or they need more than 24 months to pay their old tax bills. They can afford to pay something – just not under these terms.
So, the struggle goes – “Do I continue to drive to work and break the law so that I can make money to pay my future and old tax bills?” or “Do I comply with the state driving laws and just quit my job or cut back my hours and pay nothing?”
Here’s a real example to illustrate. A business owner was unable to pay all of his taxes as he struggled to keep his business running after the economic crisis of 2008 eventually shut the company down. Now, he’s employed elsewhere making significantly less money than before while his wife battles cancer. She is unable to work. To make ends meet, the wife’s sister loans them $20,000.00 for chemotherapy, but LDR levies the bank account and refuses to refund any portion of the funds to pay for the treatments. LDR then suspends the husband’s driver’s license and also refuses to apply the levied funds as the 20% down-payment for an installment plan so he can get his driver’s license reinstated.
As a result, he is unable to drive to work (legally) and he is unable to (legally) bring his wife to her medical appointments. Adding insult to injury, they now have no means to pay for the wife’s chemotherapy.
Believe it or not, we see this type of scenario often. Clients fall on hard times and are getting their lives back on track. They’re ready to solve their lingering tax problems with LDR, yet they can’t get them solved because they can’t fully pay the tax bill and they don’t have the money to get into an LDR installment plan. So, they can’t have their driver’s licenses reinstated. Instead, they’re forced to either drive to work which is a criminal act, or comply and essentially be left unemployed (or underemployed) because they don’t have transportation.
This is a classic situation where the “end” doesn’t always justify the “means”! But, there are practical solutions available.
First, the legislature should enact a hardship driver’s license provision to account for difficult and unavoidable circumstances that taxpayers often face. This way taxpayers can get back to work under terms that meet both parties’ needs. Even the IRS considers hardships! Even some DUI defendants get hardship licenses!
Second, the legislature should consider raising the $1,000.00 revocation threshold. There are only a handful of other states with similar laws for nonpayment of taxes, and their thresholds are significantly higher than ours. For example, last time we checked New York’s was $10,000.00 and California’s was $100,000.00. When you consider the accrual of interest and penalties, it’s relatively easy to incur a $1,000.00 unpaid tax bill. This means LDR is suspending a lot of driver’s licenses for very little return on investment. Raising the threshold would increase the return for the state and reduce administrative enforcement costs, while reducing nuisance suspensions for minor overdue accounts.
As with everything in life there are exceptions to every rule. Taxes are no exception – even when you have a budget shortfall!