A proposal to intercept state income tax refunds from local residents who are at least three installments behind in property taxes failed when acted on by the Bartholomew County Commissioners.
If approved, the owners of about 2,700 separate parcels of local property could have been affected, according to County Treasurer Pia O’Connor.
But the vote Monday was 2-1 to reject O’Connor’s proposal. While commissioners chairman Carl Lienhoop voted in favor of the concept, both Larry Kleinhenz and Rick Flohr were opposed.
Since news regarding the concept was shared last week, O’Connor said she has received a lot of positive public response regarding tax refund intercepts.
But Flohr — who calls the concept intrusive — said he believes most taxpayers won’t like it.
Audience member Chuck Doup agreed, saying the proposal would be exceptionally unpopular because it does not apply to refunds issued to corporations, limited liability business and partnerships.
Those business entities are exempt only because the program depends on individual Social Security numbers to work, O’Connor said.
But Doup said the public will likely view it as discrimination.
While Kleinhenz repeatedly praised O’Connor on Monday for proposing innovative ways of collecting delinquent taxes, the longest-serving commissioner said he feared setting a dangerous precedent that could hurt struggling families.
“Five years from now, does county government feel OK about doing something more extreme, like using this to collect debts for the hospital?” Kleinhenz asked. “Is going after your federal tax refund next? Where does it stop?”
His final argument was that state income tax refunds are usually much smaller than those provided on the federal level, so the amount of delinquent taxes collected would likely be minuscule.
Kleinhenz said he believes the annual sheriff’s tax sale already provides an adequate mechanism to handle such debts.
But since tax refund intercepts are already being made on parents behind on their child support, Lienhoop said he doesn’t think a dangerous precedent would be set.
Lienhoop noted the authority to withhold state refunds from property owners who owe a minimum of $25 came last April after the passage of Senate Bill 515 by the Indiana Legislature. That vote led to the creation of the Tax Refund and Compliance System (TREC), O’Connor said.
“We talk about tools the General Assembly gives for economic development,” Lienhoop said. “I see this as another tool provided by the state Legislature that Pia would have in her toolbox.”
Local mortgage companies would also likely favor the concept, Lienhoop said.
TREC is essentially a debt clearinghouse program to allow local units of government to easily and efficiently collect delinquent debt. It offers an automated data export exchange between counties and the clearinghouse, with a similar back-end data import feature to update county financial records, according to the Association of Indiana Counties website.
The association administers TREC under a memorandum of understanding with the Indiana Department of Revenue.