Rat out your friends and neighbors for Steve Westly

I'm on record in support of State Controller Steve Westly's tax amnesty program. It's a beautiful, elegant idea: the Franchise Tax Board allowed tax cheats to come in out of the cold, with no risk of prosecution, in an effort to recoup some of the billions of dollars of unpaid tax. And it worked: estimates of the take range in the neighborhood of $2 billion.

But his latest scheme — to pay off Californians to turn in their neighbors whom they suspect of evading state taxes — sucks. It's a trial balloon full of farts.

Behold:

State floats tax 'informant' plan

(Sacramento Union ) If you knew a tax cheat, would you rat him out for a cut of the money he owes the state?
Teacher Erin Ashton said “It seems sleazy and slimy.” That was the general reaction FOX40 News found when we asked people how they felt about snitching on those who owe the state tax money. State Controller Steve Westly says the plan has the Governor’s support. It would pay you ten percent of the unpaid taxes collected by the State Franchise Tax Board for anyone you turn in.
The Franchise Tax Board is behind this program, yet officials declined to comment on the plan Monday. Plenty of others *did react. Ed Balm, a student, told us “You got the small man getting the burden again, and instead of the tax being collected on the larger corporations you’re putting the burden on you and me, the small guy. And Erin Ashton said “I just couldn’t do that to people, I know that taxes need to be paid.”
Lew Uhler is President of the National Tax-Limitation Foundation. He says the problem is with Steve Westley and the state Controller’s office. “They ought to be shaping up the way his office operates before they encourage California citizens to rat on one another.”

I don't even know where to start...

• First: I suspect that the option will be overwhelmingly exercised by poor people, and is therefore regressive.

The financial incentive (ten percent of the cheat, in the low hundreds for most sorts of cheating and in the low thousands for even crazy cheating) is not enough to convince people of the upper middle class to risk threatening the social bonds that tie them into their socioeconomic cohort.

I'm not saying that rich people are more ethical than poor people. My point is that rich people generally reap an objective financial benefit from their social connections, and that this objective benefit is far larger than any reasonably expected share of the state's take after they sell their country-club golf buddy down the river, so they won't bother.

To put it another way: Assuming that ethics are a constant across class and circumstance, the people who are most likely to sell out a neighbor or acquaintance are those with the least to lose financially by severing a social bond, i.e., those who obtain little monetary benefit from such bonds — to wit, the poor. Granted that poor people mostly know other poor people and have the least to gain as well as the least to lose, I'm betting that the FTB still gets flooded with accusations from within the lower brackets.

• Second: What are the standards by which charges are to be evaluated?

To pick on the poor unwashed once more: anyone who's seen an episode of "Cops" knows that appeals to the authorities are sometimes made as payback for social mistreatment or the perception thereof. Will everyone who gets ratted out be investigated, or will some sort of filter be applied? If the former, the state might be overwhelmed by frivolous complaints; if the latter, it's hard to imagine that the outcome will be entirely equitable.

• Third: Does the informant need real information, or can they make spurious claims until one sticks?

What's to stop me from opening a phone book turning in every fat cat in Hollywood and Pacific Heights? I'm not at all convinced that everyone in that neighborhood pays their taxes, and I bet that if they're cheating, they're cheating big. My ten percent of their unpaid tax is likely to be sizable, maybe enough to buy myself that new hybrid SUV I've been coveting.

Heck, with a little bit of personal information about someone I could probably spin a pretty convincing yarn about how any one person cheated on their taxes, just by knowing something about how people in their profession or socioeconomic circumstances generally cheat when they do cheat. What's the down side? If I'm wrong, I'm wrong; it's not like it costs me anything.

• Fourth and finally: Is this, ultimately, who we are — a society of cheats and rats?

It's an accident waiting to happen: Thousands of poor people ratting out their neighbors for pennies, flooding the system, while the rich whose tax evasion actually costs the state real money either continue to wink and nod each other along, knowing that their social structure protects them from the system, or stop communicating with each other altogether because they're too busy trying to look behind their backs.

Steve, this one's a stinker. Ditch it.

Now, if this proposal were about whistleblower protection for corporate employees who want to turn in their company for avoiding its share of state (and federal) taxes, perhaps we could talk...

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Rat out your friends and neighbors for Steve Westly

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