Soon Big Brother Will Know Enough About You It Won’t Need Your Tax Return

Today’s Moment of Orwellian Dread comes from Massachusetts Revenue Department Commissioner Alan LeBovidge via The Boston Globe:

In theory… the state may eventually be able to track down so much information about a resident’s finances that the state, rather than the individual, could complete the individual’s tax return.

“This is not something that’s going to go away. It’s only going to grow,” LeBovidge said. “The world is shrinking. There’s fewer and fewer places to hide.”

The initiative, dubbed “Discovery” by agency officials.… works by linking information the state has on each taxpayer to more than a dozen public databases to complete a financial puzzle, piece by piece, about each individual.…

The amount of data involved is enormous. LeBovidge said it took 18 months for the Internal Revenue Service to develop one of the databases the state uses; it took the state two months just to load the database on its computers.…

Sometimes the clues indicate a taxpayer may be hiding something. An individual reporting only $20,000 in annual income yet identified by Registry of Motor Vehicle records as having a $60,000 car would merit a second look. So would a plumber with a low reported income but a lavish lifestyle. Is he getting paid under the table?

The public databases include information from the Internal Revenue Service, Customs, state licensing boards, the Registry of Motor Vehicles, state incorporation records, and other sources LeBovidge won’t even discuss. “We can’t give away all the secrets,” he said.

Eventually, LeBovidge said, his agency will start tapping into private databases as well. Dun & Bradstreet, he said, tracks all sorts of indicators of business activity that may help the state uncover corporations not now on its radar screen that owe taxes.

About the only place taxpayers can fudge on their federal returns and not get caught, absent an audit, is their charitable contributions, said Frederick Beebe, the state’s deputy commissioner for audits. But he said it’s only a matter of time before charities start reporting donors and the size of their gifts to tax-collection agencies for verification.

Separately from the Discovery program, the state is also gathering information from other sources to track down tax leads. Most states now share with each other the results of their audits. North Carolina, for example, might audit a furniture manufacturer and get a list of customers to whom the company shipped a chair or a sofa without collecting sales tax.

North Carolina could share that list of customers with other states so they could track down those residents who bought a piece of furniture but didn’t pay use tax on it. The same sharing of data goes on with purchases of jewelry, furs, and virtually anything else that’s taxable.

Massachusetts is already demanding that shipping companies like United Parcel Service and Federal Express share the names of individuals who receive shipments of cigarettes from out-of-state companies. The state has collected $162,000 in cigarette excise taxes this way over the last year.

LeBovidge said eventually the state will begin scrutinizing all shipments into Massachusetts to see if residents are buying items on which they should be paying a use tax.

Noting that the best way to avoid tax increases is to collect all existing taxes, the commissioner stressed that the hunt for unpaid tax revenues is just beginning. “We’re in the embryonic stages of where this is going to go,” he said.