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Department of Revenue keeps dropping its bucket in the dry wells

May 19, 2009

Iowa's fiscal situation continues to worsen, reports State Auditor David Vaudt:

While the federal stimulus money rescued the budget this year, it is being used to finance ongoing programs that will cause big budget headaches in the following year, when Vaudt said the budget shortfall is projected to reach $1 billion.
Looking at next year's budget, Vaudt said the state will collect $5.8 million in taxes, but lawmakers ended up spending $6.6 billion. They covered that gap with $529 million in stimulus money, and transferring another $317 million from other special state funds such as a cash reserve fund.

Iowa's deficit is certainly not due to a lack of wasted effort on behalf of the Iowa Department of Revenue. The department has just issued another round of notices looking for unreported income based on attempts to match state returns with federal 1040s.

This is a huge waste of postage and manpower. Many of these notices are being sent to taxpayers who have received similar notices for the prior two tax years, and who ended up demonstrating that they had filed their original Iowa returns correctly. Now Iowa is back for a third try at taxpayers who have already twice cleared themeselves.

It is also rude, abusive and expensive. Each notice requires the taxpayer to spend time or money reporting information. If they need to ask for this information year after year, they should have changed their forms by now to gather the needed information in the beginning. I have personally suggested such a change to the Director of the Department. He must have forgotten to write it down.

Or maybe this is just part of the state's job creation strategy. They provide paychecks to state employees to send out pointless notices, and revenue to tax preparers to respond to them. The only losers are the taxpayers.

Tags: Iowa tax administration.iowa tax policy.