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Eye On Olympia

Wed., Sept. 12, 2007, 12:07 p.m.

Intentional or not, nearly half a billion a year in taxes draining via “underground economy”…

More than 1 in 20 companies doing business in Washington either pay less than their fair share of state taxes or pay nothing at all, state officials said Wednesday.

All told, tens of thousands of businesses in Washington are underpaying their state taxes by about $457 million a year, due largely to an "underground economy" of service-related companies and other employers, state officials say.

"We know very little about these people" other than that they're not paying, state Department of Revenue Director Cindi Holmstrom told Gov. Chris Gregoire Wednesday. Part of the data came from a comparison of firms registered with the IRS but not with the state.

A couple of things researchers do know: Most of the unpaid taxes are from businesses based other states. Of those based here, many are small, grossing less than $100,000 a year.

The discussion was part of Gregoire's "Government Management Accountability and Performance" process, a series of early-morning meetings with top staffers in a conference room beneath the capitol rotunda.

The $457 million includes unpaid taxes, worker's compensation payments and unemployment insurance. Some companies don't pay enough in taxes; others pay nothing, since they're not even registered as a business.

State officials are hoping to narrow the "tax gap" with a mix of education, audits and enforcement.

"We're going to find you…So come on in. The welcome mat is out today," said Gregoire, who said she first heard about the problem as attorney general. "The last thing we want as a message in this state is that you're at a disadvantage if you play by the rules."

Wilson, at The Olympian, also has a good post on this.




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