New York teams with IBM to collect taxes

IBM has partnered with New York state’s government to go
after delinquent taxpayers.

Working together, the state government and the corporation
have come up with the Optimizer, a system that uses predictive modeling
software to identify delinquent taxpayers most apt to pay what they owe.

{mosads}It also instructs tax collectors on how best to approach
them. The system went online last November and so far has exceeded
expectations.

“My staff reports to me that they like what they see,”
William Commiskey, New York’s deputy tax enforcement commissioner, told The
Hill.

The money is crucially important given the recession.

Like most states, New York is facing historic budget
shortfalls that have forced legislators to make deep cuts in programs and dire
adjustments to hiring. 

The left-leaning Center on Budget and Policy Priorities
(CBPP) recently predicted that the Empire state will confront a mid-year budget
shortfall of $3.2 billion for 2010, which amounts to roughly 5 percent of its
overall budget.

The state of New York estimates that it is owed about $3
billion in taxes that are seriously in arrears over a 20-year time span.
Roughly 600,000 taxpayers are responsible for the money.

Commiskey predicts that over the next 3 years the
Optimizer will bring into the state an additional $100 million in revenue that
it otherwise would have never seen.

The Optimizer also instructs Commiskey on how to allocate
the manpower in his office to collect past due taxes.

“Its recommendations are on the current level of staff
available to the office,” he said, adding, “We get to more places faster.”

The CBPP found that budget shortfalls are widespread, with
48 states having either just addressed the issue or still facing it.  

The total tax shortfall for states sits at $196 billion, a
78 percent increase over 2009, according to the CBPP.

Data from the U.S. Census Bureau shows that state government
tax collections totaled $715 billion in fiscal year 2009, a $66.9 billion
decrease from 2008.

A number of states have contacted IBM about the program.

“We have had significant interest from multiple states, and,
frankly, from central governments around the world,” IBM executive Shaun Barry
told The Hill. “This [budget shortfalls] seem to be a common business problem
across the world.”

One potential client is the Internal Revenue Service.

“The IRS has certainly expressed some interest in this type
of solution,” Barry said.

The IRS would not comment on the issue.

Data used by the IBM system is stored within the state
agency. Privacy laws prohibit taxpayer information from being shared with the
company.

“There are strict privacy laws and [New York] has not
disclosed that information to IBM,” Barry said.

Commiskey said the system has cost the state less than $10
million to implement.

“If it returns $100 million of additional revenue in the
next 3 years, the return on investment is going to be significant,” he said.