Kentucky rewards creation museum with huge tax breaks
Thursday, August 11, 2011
Tuesday, August 2, 2011
9.30.98 tax evasion letter to Ky Executive Branch
November 30, 1998
Hon. Joey Pendleton
Senator, 3rd District
Program Review and Investigations Committee
905 Hurst Drive
Hopkinsville, Kentucky 42240
Hon. Jack L. Coleman, Jr.
Representative 55th District
Program Review and Investigations Committee
P.O. Box 600
Burgin, Kentucky 40310
Gentlemen:
I want to take this opportunity to especially thank Rep. Jack Coleman for his efforts in placing this question ----usage tax evasion ---- on the House Program & Review agenda and this committee for voting this question to be placed on the committee’s agenda.
Even though I’m not one of his constituency, I appreciate Rep. Richard L. Murgatroyd efforts to placate my concerns by contacting appropriate state officials of Operation Border Crossing seeking tax evasion collection status concerning number of Ky owner violators exposed by State Police November 1998 “Operation Border Crossing” program.
I also want to thank Senator Buford for his efforts to get a bill through the legislature and pass on his thoughts shared with me in a July 22, 1998 reply wherein he stated “..’Tax collection by the state on vehicles is without a doubt the worst it could be.... As you know, I presented a bill which would have brought in these outlaws to pay taxes on their cars......A very pitiful sight, but I'll continue to pressure in this area to stop the state's free loaders. Maybe we will have better luck in 2000.’
First, I writing you asking you to take action to equalize the tax burden among all Kentucky passenger car owners that has been un-equalized since‘84.
Secondly, I’m writing you as a retired Revenue Cabinet veteran, who worked my last 9 years out of 28 1/2 years of total service, to locate, identify and collect from illegally licensed car owners.
However, over the period of the Freeroader program, only 40% of the tax evaders estimated to exist in ’85 were identified and billed.
In my judgment, even though the State Police and the Revenue cabinet worked together from ’85 thru ’93, sixty-percent of the tax evaders went free. The absence of DOT’s Division of Vehicle Enforcement sworn officers implementing state-wide registration enforcement was the reason 60% of the tax evaders went undetected.
After spending my last 9 years with the Freeroader program trying to eliminate illegal plate use, I retired in ’94 and for the next 4 years wrote letters to all elected and appointed state officials in an effort to bring attention to tax evasion.
After retirement, some of the following elected officials received letters were:
Elected officials were: Governor and Senators’ Richard L. Roeding,Jack Westwood, Gex Williams, Kim Nelson, Gerald Neal, Larry Saunders and attorney general chandler, Representatives: Jim Callahan, Thomas R. Kerr, JD Reinhardt, John Siler, A. Simpson, Katie Kratz Stein, P Worthington, Mike Bowling and Joe Clarke.
Appointed Officials contacted about Kentucky motor vehicle owners committing tax evasion:
Finance secretary John p. McCarty, Transportation Secretary Fred Mudge, Revenue Secretary Handmaker and Deputy Tran Sec. Kevin Flannery, Representative Jack Coleman heard my plea and placed this question for your vote. Thankfully, the committee approved.
A major factor contributing to Freeroader’s limited successful attempt discouraging deliberate and/or ignorant noncompliance was 1980's recession producing budget shortfalls, as documented by the 1/15/95 Courier Journal dated on page. The article documented years state experienced budget deficits as being 1985,1986, 1988, 1989, 1990, while nine of the fourteen years experienced budget deficits averaging $164 million.
One of the most serious sins a government can commit against it's citizens is toleration of unfair tax burden.
Testimony by a Louisville car dealer before 1985 joint appropriation and revenue committee estimated state losing $35 million through usage tax evasion.
Another verification of tax evasion existing prior to ‘84 legislation was the $16,172,000 property tax windfall after implementation of the ‘84 legislation.
In October, ‘85 the Revenue Cabinet begin the Freeroader pilot study to determine lost property tax revenues to illegal registration.
The Freeroader program began it’s growth in 1985 in the following manner:
· acquired access to the State Police’s national crime database (N.C.I.C.) permitting Kentucky Revenue Cabinet Freeroader personnel to identify license plate data, such as name, address, make and model of vehicle, registrant’s address as well as other pertinent information about the registrant or their vehicle.
· Studied how violators’ circumvented Kentucky’s registration and revenue laws by going to the field (Northern Kentucky counties of Kenton, Campbell and Boone) developing field techniques to help identify violators
· Freeroader program acquired u-drive-it data from the Division of Motor Carriers identifying 89 u-drive-it permit holders operating fleet vehicles using out-of-state license plates, yielding first collection of $276, 354.21 of omitted property taxes
· Established a ‘hot line’ 800 number to receive anonymous tips and circulated this information throughout the State thru press conferences, contact with the State Police, the Northern Kentucky Superintendents Association, Northern Kentucky’s City Police officers association, County Clerk’s Association, PVAs, Sheriff’s Association and Municipal League of Cities
· Borrowed a personal computer and computer personnel in ’85 to begin writing programs for billing purposes
· a request was made to Transportation Cabinet’s Division of Vehicle Enforcement asking the Frankfort hierarchy to allow their vehicle enforcement officers to do the field work; however, they would not grant permission for their participation-Revenue forced to use two people for all clerical, investigation and field work
· the Revenue Cabinet’s freeroader program billed over $13 million; collected $5,016,707, with sixty-percent ($1,294,248.60) of the $2,157,081 property tax collections being disbursed to local taxing jurisdictions such as schools, libraries, county government and $2,859,626 of usage tax collections going to the Road Fund. In March ’93, turned over to Property Tax $8.2 million of billings along with 20,717 un-worked anonymous tips.
· from ’93 thru ‘98 Property Tax collected $2,585,726 in property tax collections and $184,911 in usage tax collections.
In June ’94 a Kentucky court decision ruled Vehicle Enforcement Officers are responsible for enforcing all statutes pertaining to motor vehicles.
After retiring in April, 1994, I made a taxpayer inquiry in 1995 as to the status of 20,717 un-worked anonymous tips estimated @$8.2 million of potential usage & property tax billing turned over in March,1994. The Deputy Secretary Renee True replied in a letter dated June 28, 1995 stating ‘Currently, Freddie Freeroader has over 500 tips [no mention of the 20,717 un-worked anonymous tips] on which no action has yet been initiated. However, let me assure you that in the near future, each and every one of these tips will be investigated”.
However, Renee True abandoned property tax in August, 1995 for economic development..
After learning of Renee True's 8/1995 departure from Revenue cabinet, in March, 1996 I inquired of Governor's office. March, 1996 inquiry was answered in a May 1, 1996 letter, written by Mike T. Alexander [former PVA] stating ‘We certainly appreciate the benefit of your thoughts and concerns on these important issues.”’
In a July 30, 1996 letter from Commissioner of the Department of Vehicle Regulation of Transportation Cabinet, Ed Logsdon, stated ‘To the degree that it does not interfere with their primary duty of truck compliance, I have directed that vehicle enforcement officers be alert to expired registrations and possible illegal out-of-state registrations”.’
In a August 5, 1996 letter from Revenue Cabinet Secretary Margaret A. Handmaker, she stated the KRC policy is to provide information and support to law enforcement and local officials in their efforts to identify evasion of tax through improper registration of vehicles. I am pleased to inform you that the Department of Property Taxation is working with law enforcement officials and elected officials, including district judges, to address the problem of registered vehicles and the unpaid Kentucky taxes they represent.
However, recently appointed Commissioner Hayden in June ‘96 Revenue Assets wrote the Department of Property Valuation’s compliance philosophy was changing from PVA compliance to compliance and enforcement of providing assessment support and expertize to PVA's.
Although Commissioners’ Hayden and Logsdon are well respected professional administrators, I respectfully disagree with their attitudes toward tax evasion. Its this lack of serious tax evasion attitude contributing to:
1. State’s growing motor vehicle tax evasion,
2. Usage tax evasion “violators' projected to grow from 1,944 in 1985 to 200,000 + in 2011
3. 1985 estimated $35 million usage tax loss projected in '98 to be $216 million in 2011
4. In 1998---$10 million of state income tax through non-filers,
5. $20 million of weight-distance tax,
6. $5 million of u-drive-it usage tax on lease/rental operating from Ky airports;
7. $6.5 million of property tax lease/rentals operating from Ky airports
8. $46 million of illegal trade-In usage tax and
9. $1 million of car registration fee evasion
Experts view State’s 1999 current tax compliance strategy should entail three main initiatives:
1. maintaining adequate funding for voluntary compliance;
2. encouraging additional compliance from those who are not in full compliance because they are not adequately informed or prepared to comply; and
3. discouraging willful noncompliance through effective enforcement efforts;
4. discourage legislation highlighting tax cuts without cuts to state expenses;
5. eliminate truck weight-distance tax using revenue neutral tax strategy;
Based on my years of tax compliance experience the solution to motor vehicle usage and property tax evasion is:
· Transportation Cabinet's Vehicle Enforcement Frankfort management permit Vehicle Enforcement Officers to collaborate with Department of Revenue to locate, identify “violators” and forward "violators" identity for property tax billing purposes;
· the legislative and executive branches of government solve State’s structural budget problem by;
1. cut $350 million state tax expenditures
2. cut $400 million of corporate tax shelters;
3. cut $140 million of personnel costs
4. cut $100 million (2,100) of non-merit jobs making $100,000+;
5. cut $ 22 million from reducing # of PVA to 17 & deputy Pva's by $12 million;
6. cut $ 20 million reducing # of superintendents to 17;
· educate judiciary of important role have in eliminating tax evasion. Past lackadaisical judicial attitude helped perpetuate tax evasion.
· adoption of ‘incentives’ or “stipend' to motivate involvement of state & local law enforcement officers to create tax compliance activity decreasing motivation of taxpayers to practice tax evasion;
Ky legislative, judicial and executive branches of state government must seriously fully funding property & usage tax compliance;
· in 1998 effort begun to combine with Justice Cabinet's State police the Transportation Cabinet's Vehicle Enforcement Officers;
Thank you for your time and patience and your consideration of the above facts.
Hon. Joey Pendleton
Senator, 3rd District
Program Review and Investigations Committee
905 Hurst Drive
Hopkinsville, Kentucky 42240
Hon. Jack L. Coleman, Jr.
Representative 55th District
Program Review and Investigations Committee
P.O. Box 600
Burgin, Kentucky 40310
Gentlemen:
I want to take this opportunity to especially thank Rep. Jack Coleman for his efforts in placing this question ----usage tax evasion ---- on the House Program & Review agenda and this committee for voting this question to be placed on the committee’s agenda.
Even though I’m not one of his constituency, I appreciate Rep. Richard L. Murgatroyd efforts to placate my concerns by contacting appropriate state officials of Operation Border Crossing seeking tax evasion collection status concerning number of Ky owner violators exposed by State Police November 1998 “Operation Border Crossing” program.
I also want to thank Senator Buford for his efforts to get a bill through the legislature and pass on his thoughts shared with me in a July 22, 1998 reply wherein he stated “..’Tax collection by the state on vehicles is without a doubt the worst it could be.... As you know, I presented a bill which would have brought in these outlaws to pay taxes on their cars......A very pitiful sight, but I'll continue to pressure in this area to stop the state's free loaders. Maybe we will have better luck in 2000.’
First, I writing you asking you to take action to equalize the tax burden among all Kentucky passenger car owners that has been un-equalized since‘84.
Secondly, I’m writing you as a retired Revenue Cabinet veteran, who worked my last 9 years out of 28 1/2 years of total service, to locate, identify and collect from illegally licensed car owners.
However, over the period of the Freeroader program, only 40% of the tax evaders estimated to exist in ’85 were identified and billed.
In my judgment, even though the State Police and the Revenue cabinet worked together from ’85 thru ’93, sixty-percent of the tax evaders went free. The absence of DOT’s Division of Vehicle Enforcement sworn officers implementing state-wide registration enforcement was the reason 60% of the tax evaders went undetected.
After spending my last 9 years with the Freeroader program trying to eliminate illegal plate use, I retired in ’94 and for the next 4 years wrote letters to all elected and appointed state officials in an effort to bring attention to tax evasion.
After retirement, some of the following elected officials received letters were:
Elected officials were: Governor and Senators’ Richard L. Roeding,Jack Westwood, Gex Williams, Kim Nelson, Gerald Neal, Larry Saunders and attorney general chandler, Representatives: Jim Callahan, Thomas R. Kerr, JD Reinhardt, John Siler, A. Simpson, Katie Kratz Stein, P Worthington, Mike Bowling and Joe Clarke.
Appointed Officials contacted about Kentucky motor vehicle owners committing tax evasion:
Finance secretary John p. McCarty, Transportation Secretary Fred Mudge, Revenue Secretary Handmaker and Deputy Tran Sec. Kevin Flannery, Representative Jack Coleman heard my plea and placed this question for your vote. Thankfully, the committee approved.
A major factor contributing to Freeroader’s limited successful attempt discouraging deliberate and/or ignorant noncompliance was 1980's recession producing budget shortfalls, as documented by the 1/15/95 Courier Journal dated on page. The article documented years state experienced budget deficits as being 1985,1986, 1988, 1989, 1990, while nine of the fourteen years experienced budget deficits averaging $164 million.
One of the most serious sins a government can commit against it's citizens is toleration of unfair tax burden.
Testimony by a Louisville car dealer before 1985 joint appropriation and revenue committee estimated state losing $35 million through usage tax evasion.
Another verification of tax evasion existing prior to ‘84 legislation was the $16,172,000 property tax windfall after implementation of the ‘84 legislation.
In October, ‘85 the Revenue Cabinet begin the Freeroader pilot study to determine lost property tax revenues to illegal registration.
The Freeroader program began it’s growth in 1985 in the following manner:
· acquired access to the State Police’s national crime database (N.C.I.C.) permitting Kentucky Revenue Cabinet Freeroader personnel to identify license plate data, such as name, address, make and model of vehicle, registrant’s address as well as other pertinent information about the registrant or their vehicle.
· Studied how violators’ circumvented Kentucky’s registration and revenue laws by going to the field (Northern Kentucky counties of Kenton, Campbell and Boone) developing field techniques to help identify violators
· Freeroader program acquired u-drive-it data from the Division of Motor Carriers identifying 89 u-drive-it permit holders operating fleet vehicles using out-of-state license plates, yielding first collection of $276, 354.21 of omitted property taxes
· Established a ‘hot line’ 800 number to receive anonymous tips and circulated this information throughout the State thru press conferences, contact with the State Police, the Northern Kentucky Superintendents Association, Northern Kentucky’s City Police officers association, County Clerk’s Association, PVAs, Sheriff’s Association and Municipal League of Cities
· Borrowed a personal computer and computer personnel in ’85 to begin writing programs for billing purposes
· a request was made to Transportation Cabinet’s Division of Vehicle Enforcement asking the Frankfort hierarchy to allow their vehicle enforcement officers to do the field work; however, they would not grant permission for their participation-Revenue forced to use two people for all clerical, investigation and field work
· the Revenue Cabinet’s freeroader program billed over $13 million; collected $5,016,707, with sixty-percent ($1,294,248.60) of the $2,157,081 property tax collections being disbursed to local taxing jurisdictions such as schools, libraries, county government and $2,859,626 of usage tax collections going to the Road Fund. In March ’93, turned over to Property Tax $8.2 million of billings along with 20,717 un-worked anonymous tips.
· from ’93 thru ‘98 Property Tax collected $2,585,726 in property tax collections and $184,911 in usage tax collections.
In June ’94 a Kentucky court decision ruled Vehicle Enforcement Officers are responsible for enforcing all statutes pertaining to motor vehicles.
After retiring in April, 1994, I made a taxpayer inquiry in 1995 as to the status of 20,717 un-worked anonymous tips estimated @$8.2 million of potential usage & property tax billing turned over in March,1994. The Deputy Secretary Renee True replied in a letter dated June 28, 1995 stating ‘Currently, Freddie Freeroader has over 500 tips [no mention of the 20,717 un-worked anonymous tips] on which no action has yet been initiated. However, let me assure you that in the near future, each and every one of these tips will be investigated”.
However, Renee True abandoned property tax in August, 1995 for economic development..
After learning of Renee True's 8/1995 departure from Revenue cabinet, in March, 1996 I inquired of Governor's office. March, 1996 inquiry was answered in a May 1, 1996 letter, written by Mike T. Alexander [former PVA] stating ‘We certainly appreciate the benefit of your thoughts and concerns on these important issues.”’
In a July 30, 1996 letter from Commissioner of the Department of Vehicle Regulation of Transportation Cabinet, Ed Logsdon, stated ‘To the degree that it does not interfere with their primary duty of truck compliance, I have directed that vehicle enforcement officers be alert to expired registrations and possible illegal out-of-state registrations”.’
In a August 5, 1996 letter from Revenue Cabinet Secretary Margaret A. Handmaker, she stated the KRC policy is to provide information and support to law enforcement and local officials in their efforts to identify evasion of tax through improper registration of vehicles. I am pleased to inform you that the Department of Property Taxation is working with law enforcement officials and elected officials, including district judges, to address the problem of registered vehicles and the unpaid Kentucky taxes they represent.
However, recently appointed Commissioner Hayden in June ‘96 Revenue Assets wrote the Department of Property Valuation’s compliance philosophy was changing from PVA compliance to compliance and enforcement of providing assessment support and expertize to PVA's.
Although Commissioners’ Hayden and Logsdon are well respected professional administrators, I respectfully disagree with their attitudes toward tax evasion. Its this lack of serious tax evasion attitude contributing to:
1. State’s growing motor vehicle tax evasion,
2. Usage tax evasion “violators' projected to grow from 1,944 in 1985 to 200,000 + in 2011
3. 1985 estimated $35 million usage tax loss projected in '98 to be $216 million in 2011
4. In 1998---$10 million of state income tax through non-filers,
5. $20 million of weight-distance tax,
6. $5 million of u-drive-it usage tax on lease/rental operating from Ky airports;
7. $6.5 million of property tax lease/rentals operating from Ky airports
8. $46 million of illegal trade-In usage tax and
9. $1 million of car registration fee evasion
Experts view State’s 1999 current tax compliance strategy should entail three main initiatives:
1. maintaining adequate funding for voluntary compliance;
2. encouraging additional compliance from those who are not in full compliance because they are not adequately informed or prepared to comply; and
3. discouraging willful noncompliance through effective enforcement efforts;
4. discourage legislation highlighting tax cuts without cuts to state expenses;
5. eliminate truck weight-distance tax using revenue neutral tax strategy;
Based on my years of tax compliance experience the solution to motor vehicle usage and property tax evasion is:
· Transportation Cabinet's Vehicle Enforcement Frankfort management permit Vehicle Enforcement Officers to collaborate with Department of Revenue to locate, identify “violators” and forward "violators" identity for property tax billing purposes;
· the legislative and executive branches of government solve State’s structural budget problem by;
1. cut $350 million state tax expenditures
2. cut $400 million of corporate tax shelters;
3. cut $140 million of personnel costs
4. cut $100 million (2,100) of non-merit jobs making $100,000+;
5. cut $ 22 million from reducing # of PVA to 17 & deputy Pva's by $12 million;
6. cut $ 20 million reducing # of superintendents to 17;
· educate judiciary of important role have in eliminating tax evasion. Past lackadaisical judicial attitude helped perpetuate tax evasion.
· adoption of ‘incentives’ or “stipend' to motivate involvement of state & local law enforcement officers to create tax compliance activity decreasing motivation of taxpayers to practice tax evasion;
Ky legislative, judicial and executive branches of state government must seriously fully funding property & usage tax compliance;
· in 1998 effort begun to combine with Justice Cabinet's State police the Transportation Cabinet's Vehicle Enforcement Officers;
Thank you for your time and patience and your consideration of the above facts.
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