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Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, June 24, 2011

Soled: No Taxes, No Driver's License

Tax AnalystsJay A. Soled (Rutgers Business School) has published Using Driving Privilege to Solve States’ Fiscal Crises, 60 State Tax Notes 841 (June 13, 2011):

Most people place a high premium on driving, and all states place a high premium on taxpayers paying their fair share of taxes. State lawmakers should connect the privilege of driving to payment of one’s income taxes. That connection is equitable and would apply universally, regardless of a taxpayer’s socioeconomic class or outstanding tax debt.

How would the proposal tying driving privileges to being current with one’s income taxes operate in practice? Once an income tax assessment had been made against a taxpayer, the state would add the taxpayer’s name to a ‘‘No-Drive List.’’ When that taxpayer’s license was to be renewed, that state’s motor vehicles agency would deny his renewal application. Only when the tax in question was paid in full or, alternatively, when the taxpayer entered into an installment payment plan with the state, would his name be removed from the list, at which time he could then reapply for renewal of his driver’s license.

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In Arizona, licenses for anyone under 65 do not expire until that age is reached. Did the author research license longevity in other states? Of course, it could be a revenue generator if states required licenses to be renewed, with a fee, every six months.

Posted by: Bob | Jun 24, 2011 12:04:50 PM

So if I challenge a tax assessment, I can't drive. That seems likely to make me not want to challenge an assessment.

The author says you can drive if you enter into a payment plan, but what if you can't afford the payment plan? Nothing requires the IRS to offer you one you can afford. Are you just out of luck?

I am sure there would be glitches that result in someone's name being on a no-drive list when they shouldn't be. Even if the error rate was miniscule, the large of number of people who drive would result in lots of false positives. Then you'd get ticketed (or arrested, it's not clear) and have to hire a lawyer. Who'd pay for that?

It means your income tax information would have to be shared by the feds with the states. How many government workers are we going to let have access to this data? If it ends up in state databases, and mistakes are introduced, how will the federal program ensure the states correct the error?

Also, the costs of administering this program might very well outweigh the revenue collected. Is there an estimate of the cost?

If a student wrote this paper, it would merit a B- for how well thought out it is. Altogether weird.

Posted by: Mithras | Jun 24, 2011 1:04:28 PM

@Mithras: States already have much if not all of the federal tax information.
General point: Pennsylvania has a law (and I think most other states also have similar or identical laws) that prohibit driving if the person lacks insurance. That law is observed so much in the breach that another law requires drivers to carry uninsured motorist insurance to cover the damages caused by drivers who lack insurance. Add in the people whose licenses have been revoked for DUI and who are still driving. It is joked that if all the people without valid licenses were removed from the road, traffic congestion would decrease significantly! I daresay people who don't pay their taxes aren't all that likely to observe a "don't drive without a valid license" law.

Posted by: Jim Maule | Jun 24, 2011 1:33:29 PM

I have problems with collateral consequences of this type. Suppose a congressman decides that s/he wants to take action against people who don't register for the draft [assume arguendo that this is still required.] Forthwith checkpoints are established preventing one from driving on any interstate highway unless one displays (hard copy or electronically) one's draft card. Suppose further that I have a conscientious or other objection to the military draft. Isn't this an endrun around my defenses, and doesn't the proposal here have a somewhat similar effect?

Posted by: mike livingston | Jun 24, 2011 1:49:30 PM

@Jim Maule-
Yes, the state revenue departments get federal tax information, but my local police department and the state DMV does not.

I agree completely with your general point. This proposal seems both overbroad (it sweeps up too many people into a program when the problem is limited to a small percentage of individuals) and ineffective (it won't deter scofflaws, as you point out.)

Posted by: Mithras | Jun 24, 2011 2:41:34 PM

The government can do one better -- when you seek socialized medical care from a doctor or at a hospital, the national computer network will match your medical records with your tax records, in which case you will have to provide updated contact and employment information and sign a tax payment agreement! Why, there's no end as to what privileges the government can take away or the penalties with which they can threaten you.

Of course, as a private business owner, my leverage for collecting A/R is to go to court, which is usually a waste of time, or cutting off future business with the debtor. The difference between me and the government is that the government can pull guns on us, and I can't unless I hire the Mafia.

That's the ticket! The government can send hit men to debtors and break fingers until the tax debts are paid! Someone contact Geithner with these ideas!

Posted by: Woody | Jun 24, 2011 2:58:10 PM

Mithras -- you seem to miss the point. The issue is not whether states can withhold or revoke drivers licenses because someone challenges a tax assessment. Rather, the issue is whether a state may take that action because someone refuses to pay their taxes. If you disagree, provide a concrete example, verifiable by any objective observer, of any state that has withheld or revoked a drivers license because the applicant or license holder challenged a tax assessment.

Yes, you may find an anecdote or two out there that is consistent with your hypothesis, but in my judgment that would not prove your point, which would require a heck of a lot more evidence to support its truth.

Posted by: Jake | Jun 24, 2011 3:03:14 PM

Why don't we stop messing around and just go with a "no taxes, get waterboarded" rule?

Posted by: anon | Jun 25, 2011 8:13:27 AM

I can see someone saying that they cannot pay their tax debts, because their inability to drive prevents them from earning a living. Most of the country does not have viable made transit alternatives.... And for the few locales that have alternatives, the taxpayers there may not care about having a licence.

Posted by: anon | Jun 25, 2011 1:53:11 PM

Maryland is way ahead on this one. In Maryland, the Comptroller of the Treasury must certify that a taxpayer is current in his/her/its state taxes, has made satisfactory arrangements to pay undisputed back taxes, or is engaged in a bona fide administrative dispute over an unpaid tax liability before a driver's license will be renewed by the Motor Vehicle Administration. Similar certifications must also be made before professional and occupational licenses of various types can be renewed. Such as law licenses, medical licenses, dental licenses, etc. Guess what? It's working.

Posted by: Publius Novus | Jun 27, 2011 7:04:03 AM

@Publius Novus... It depends upon your definition of "working," how that is measured, and by what side.

How many people are still out of compliance and suffering getting to work or getting decent employment further away or even making it to the grocery stores? And, don't say that all you need is an arrangement to pay the back taxes, unless you've seen some of those arrangements. I have a client who is trying to keep his daughter alive with medical care, but was denied that cost as a "necessary expense" in computing what he could afford to pay, because she is not legally his dependent.

Government runs on inflexible rules made by bureaucrats - not by common sense or decency.

Posted by: Woody | Jun 27, 2011 8:20:15 AM