Cook County treasurer's office working against taxpayers

Because Cook County, Illinois, where I live, added one percent to an already high sales tax rate, Chicagoans will soon be the sorry souls paying the nation's highest sales tax. Suburbanites like myself will pay a little less, but my sales tax rate will only be among the highest in the nation.

What do citizens like myself get in return? Not much.

Sometimes people pay too much in tax to the county, property taxes usually, and the county can't even handle that properly.

A Chicago company called Kensington Research and Recovery, a member of the Better Business Bureau, specializes in scouring public records to find cash for individuals who have overpaid their taxes, been overcharged, or for some reason or another have money owed to them from a government entity. Companies like Kensington, or the better-known Keane, are called "finder" or "tracer" firms.

Kensington mails letters to those who may have public money coming their way--and they keep half of what they find. This is completely legal. Keep in mind in many cases, the individuals who receive those letters quickly do some research on their own and collect their cash. All of it. Others hire Kensington.

Let me tell you from personal experience, getting money returned from Cook County is an onerous task. After we moved to Morton Grove in 1999, Mrs. Marathon Pundit paid the real estate tax--the bill came in the name of our home's previous owner, even though I told her that our property taxes are added into our monthly mortgage payments. Hey, I make mistakes too. And so do many of the 5.3 million residents of Cook County.

I quickly wrote a letter to the office of Maria Pappas, the Cook County Treasurer. The reply I got was something along the lines of, "Yes, you are correct. Mail a copy of the cancelled check you sent us, and we'll return your money." I did that. A month later, I got another letter, stating "We need a copy of both sides of the cancelled check." I called my bank, and they sent me the a copy of both sides--for a fee. A key point: In the first letter, the treasurer's office didn't specify they needs both sides of the check.

About four months later, we finally got our money back. It was sealed in red tape. Okay, I'm kidding about that last part.

Now you know why Kensington Research keeps half the money they collect for their clients. Dealing with government bodies can be an ordeal.

Kensington doesn't charge an "up-front fee," and if they collect no cash, Kensington doesn't charge their clients a penny.

For almost two years, until July 2007, Kensington was prevented from submitting requests to the county treasurer's office, saying "it had become overwhelmed by the number of requests." A judge now allows Kensington to submit 400 research inquiries a month.

Call me an idealist, but why can't Cook County simply notify taxpayers of overpayments? Especially since there is a five year statute of limiations to collect county overpayments.

Let me tell you about more red tape. Last Tuesday, I was summonsed for jury duty. I waited in line for a half an hour in the cold to make it past the security check so I could get into the courthouse. There are some regional county offices also in that building. The woman in line next to me, who was about sixty, was there to let the treasurer's office staff know that her mortgage was finally paid off.

That was mighty cold red tape.

NBC 5 Chicago did a story last Thursday on Kensington, one that took the politicians' side of things.

But let me remind you: Even on a relatively simple refund that was clearly owed to my wife and I, it was a major struggle to get our money back.

Illinois' State Treasurer, Alexi Giannoulias, has stepped into the fray. He told NBC 5, "Essentially, these companies are duping consumers for substantial amounts of money on property that is already theirs."

Giannoulias supports a bill that will compel firms like Kensington to disclose more information in their solicitation letters that will make it easier for taxpayers owed money, that is, to collect it on their own--for free--rather than using Kensington or some other company. As I stated earlier, often citizens do that anyway. The bill places a 10 percent finder's fee cap on the tracer companies. That may seem fair. But will the tracer firms bother to toil for a much smaller fee? And will this mean that Cook County will end up keeping more overpayments?

Let's be clear--If Cook County was doing things in a proper fashion--a foolish hope, perhaps, companies like Kensington wouldn't have to step in. Just as nature abhors a vacuum, so does the marketplace. When there is an unfulfilled need, business steps in. Particularly when the public sector fails.

There has to be a better way.

Giannoulias' office has a site where citizens can search for unclaimed property. But not for tax overpayments. The county treasurer's office site has nothing of the sort, but does note you can make tax payments at over 300 Chase Bank locations.

I'm sure Chase appreciates the plug, and the Chase logo looks real nice on the Cook County Treasurer's web site.

UPDATE March 20: There is a spot on the county treaurer's site to search for refunds, but it is not easy to use.


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Black business and the gross receipts tax

Last week we saw the Governor rally support amongst black religious leadership. It seems obvious that at said press conference the ministers are for this tax-fairness plan and the Governor's programs for affordable health care and education. We see one segment of this population what about those blacks who owns businesses.

Well for the most part I saw opposition. Unfortunately no group is totally monolithic since I see that the governor has the support of another group of black business owners...

“The Illinois State Black Chamber of Commerce and its membership embraces the ideas of the Governor's plan to invest in Illinois families by providing access to affordable healthcare for small businesses and all Illinois residents, increasing funding for our schools, and creating a tax system that is fair for businesses and families alike. The State Black Chamber of Commerce agrees with the Governor that ‘the need is clear and the time is now,’ and that is why we are committed to working with the Governor's office to get the General Assembly's support so that we may create a fair and equitable system that levels the playing field, reduces the burden on middle class families, helps small and mid-size businesses become more competitive and lessens the tax burden on all Illinois residents,” Illinois State Black Chamber of Commerce President/CEO Larry Ivory said.

OK but what are those opposed to the tax fairness plan are saying anyway? From Crain's...

While ABLE formally decided to further review the matter and to examine a possible “alternative solution” to the state’s financial needs, President Hermene Hartman says the organization in fact opposes the proposal.

“We appreciate the governor’s desire to close corporate loopholes” in the existing tax structure, said Ms. Hartman, CEO and publisher of the Hartman Publishing Group, which produces N’Digo and Savoy magazines. “But making all business pay for the loopholes when we didn’t benefit from them is a mistake.”

Ms. Hartman is even more direct in a column posted on N’Digo’s Web site, which says passage of Gov. Blagojevich’s proposal as written will mean “the end of the entrepreneur” in Illinois.

Hmmm, what about this column by Hermene Hartman? Well here's a little taste of what she said in the aformentioned column...

The thought is that there are corporate tax loopholes favoring big business, so much to the point that some of the largest companies in that state are tax-exempt. The gross receipts bill is an attempt to correct that, and indeed it should. The tax excludes small business with revenues of $1 million or less. This sector represents the cottage industry, personality businesses, and ma and pa shops. These types of businesses usually do not employ more than three people. Everybody else pays.

The state has redefined “small business.” What happens to federal regulations that define small business? For the most part, small business is under $50 million or has “size standards.” Most businesses under a million in revenues do not hire, and are very small operations. The governor’s bill hurts small business enterprises that hire most employees and represent the fastest growing business sector.

For every million dollar for a professional service business, the proposal asks for 1.8 percent of gross receipts. That represents $18,000 per million. This is unfair. Essentially some companies will pay taxes on monies that might be passed through.
...
The entrepreneur is a special case, and I should hope along the way there is a separation between the entrepreneur business and the corporate business. There is a drastic dynamic distinction to be made. The entrepreneur is a small business working on his own steam, and is usually a niche type business with limited resources, bootstrap strategies, and in the case of the minority, limited access to working capital.

The comparisons are limiting. Why should the local neighborhood grocery store pay the same taxes as Jewel and Dominick’s? The small grocery will probably never grow to the heights of the Jewel. Why should the small boutique business be charged the same tax as the Michigan Avenue super store?

The point is, they shouldn’t. It is an unfair business comparison and an unfair business tax.

If this tax is passed in its present state, it is the end of the entrepreneur. The concept of small business needs to be reconsidered. A consideration should be given to grading business — small business, entrepreneur, corporate, and mega businesses. The margins of these businesses are drastically different. It is one thing for the Wal-Marts of the world to have a 5 percent margin, and another for the small grocer to have a 5 percent margin.

Entrepreneurs, as they exist in the State of Illinois, are on the way to extinction if this tax is enforced as it is currently stated. By the time you pay income tax, state tax, federal tax and payroll taxes, it just isn’t worth it. The entrepreneur’s operation is stifled, and literally the various governments become hidden business partners that most do not want.

Entrepreneurs are literally going to be penalized for being in business. It is unfair for the government to place the schools and health industry on one sector of society — the business community.

So she is going to bat for the entrepreneur here. And these are good points, but take a look at her recommendation and that includes raising the income tax. An income tax that she says hasn't been raised in 40 years...

Bite the bullet. Increase income taxes 1 percent for all citizens. This is the fairest tax of them all.

People who have children in school should be taxed differently than those who
have no children.

Tax businesses based on size.

Graduate the taxes by considering size of standards. Tax big businesses differently than entrepreneurs, different than small businesses, different than professional services.

Eliminate taxes. If you are paying gross receipts taxes, eliminate other taxes.

Equalize state business. Minority businesses receive a fraction of state business and should be taxed accordingly.

Minority businesses should be taxed based on opportunity in the market place, and with a formula access to capital.

Small businesses should be exempt from taxes for the first five years of existence.

Have business people assess government waste to improve efficiency, and perhaps there would be a need to increase taxes.

Have the gross tax receipt deductible from federal taxes.

I think these points right here are some good points for discussion. I hear a lot of bellyaching perhaps we can look at some alternatives.

Addendum: More information from that Crain's article...

But business groups generally have charged that the governor’s proposal instead will hurt them by raising costs too high, and many comments at the March 15 ABLE meeting were in that vein.

For instance, according to a copy of meeting minutes, Leon Finney of the Woodlawn Organization said his and many other black-owned companies would be directly affected by the new levy and that the state perhaps should look for another way to raise money.

“The tax provokes a certain amount of concern,” Mr. Finney confirmed in a subsequent interview. “It’s small companies that provide most of the jobs that drive our economy. . . .We agree with the goals that the governor set (for schools and health insurance). The question is, how do you get there.”

Becky Carroll, Gov. Blagojevich’s deputy chief of staff and spokeswoman on budget matters, conceded that ABLE gave the governor’s plan a “mixed reaction,” but said that it indicates “a willingness to learn more about the plan before making any rash decisions.”

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