Time to crack down on tax 'cheats'

Even if you apply a critical eye - looking for some unintended consequence or problem - it's hard to find anything wrong with Gov. Brian Schweitzer's multi-pronged plan to crack down on tax cheats.

"Cheats" might be a strong term, but these folks are avoiding taxes they owe to Montana, and whatever you call them, we ought to try to get the money. The governor's plan is aimed at "abusive tax shelters and income-shifting techniques" and mainly targets large multi-state corporations, wealthy taxpayers and out-of-staters who make money by selling Montana property.

As Revenue Director Dan Bucks said, "It is important that every business and individual pay their fair share of taxes."

That is harder than ever to keep track of, however, because the state's economy today includes many companies that are based in other states. And as most folks in the Flathead Valley know, there has been an incredible increase in the number of wealthy, part-time residents, including many who dabble in Montana business interests.

Schweitzer's administration estimates that the plan, if implemented, could allow the Department of Revenue to capture up to $20 million in additional revenue over two years. That's based largely on the Multi-State Tax Commission's estimate that states lost $12 billion in 2001 to income-shifting moves. Montana's share of lost revenue that year amounted to about $26 million.

It is important to remember that the Schweitzer plan is not a tax hike of any kind. Instead, it simply would apply more scrutiny to certain taxpayers.

Individuals with a net worth of more than $2 million or businesses with more than $10 million in annual sales would be required to disclose to the Department of Revenue any questionable tax shelters, and it would require additional information from businesses that pay no Montana income taxes if they have sales of greater than $500,000 in the state.

It would also require out-of-state residents who sell Montana property to pay withholding taxes at the time of a transaction, rather than relying on the individual to later report any income.

Surely, the reforms will produce uncertain results that may fall short of the administration's projections. But doing nothing would be like leaving money on the table. That's just not acceptable.