Kansas City Needs Help Collecting Taxes

Yesterday’s Kansas City Star has an interesting story about tax collection problems in Kansas City. I give Councilman John Sharp credit for an honest take on the situation:

“The findings are very disturbing,” agreed Councilman John Sharp. “Until we do a better job of collecting the taxes that are owed us, we’re not really in a position to go to taxpayers and say we need to increase taxes.”

Amen to that. Taxes should be spread widely, and then collected efficiently, so they can be as low as possible for everyone. According to the article, business license fees are one of the taxes not being collected effectively, and I am confident that Kansas City’s very complicated licensing system plays a big role in that.

The city’s contract with a private, outside collection agency does not appear to be going well:

•The Revenue Division did not include performance standards or measurable outcomes in the city’s contract with a collection agency. The city in 2008 gave its collection agency $3.8 million in potential profits and earnings tax cases to pursue. But the agency collected only $151,000.

One of the advantages of property taxation over income taxation is ease of collection. Businesses close and people move out of Kansas City. I can sympathize with both the collection agency here, and the person who allegedly owes the city income taxes from a few years back who has long since moved out of Kansas City. Trying to collect that can be very hard, and I would bet that, in some cases, the money is not actually owed in the first place. But someone always owns the land, and there are simple and easily executed lien procedures for governments looking to collect back taxes on property. I am not generally inclined to root for the government, but the ease of collecting property taxes is just one more argument against the earnings tax.