Sound Politics Public Blog: WA State Employees devise a scheme to defraud Senior Disabled Citizens.

January 01, 2009

WA State Employees devise a scheme to defraud Senior Disabled Citizens.

Briefly,

WA state grants every Senior citizen, minimum age 61, who's income is below
a statutory limit, upon an application, some reduction in their property tax
assessment. This exemption is also available to disabled individuals regardless of age. The exemption is codified in RCW 84.36.379-389

However, the Dept of Revenue [DOR], and County Assessors, invented a homegrown method in how a person is to calculate their income that is required by statute. The instructions developed by the DOR require individuals to unwittingly miscalculate their income. Since the tax benefit is inverse to income, if a person is led to miscalculate their income with a bias to high-side error, then the tax benefit will be reduced. It is also likely that an applicant can be
disqualified from receiving any benefit at all if their income can be increased above the income threshold.

Their scheme is very simple (although difficult to explain)... State employees, by disregarding two conditions set by law [Id. 383(5)], The Dept of Revenue simply combines two categories under 383(5) into one. These two statutory categories would be RCW 84.36.383(5)(A) and RCW 84.36.383(5)(B). By combining (5)(A) with (5)(B), the calculation instructions confound (A) with (B) and cause people to miscalculate income by including some or their savings, and/or borrowings, as the case may be. The Exemption is only dependent on income, not a person's savings. But with savings, or borrowings, added to income the amount of tax
relief is now computed on this inflated number.

This exemption is offered state-wide but administered through the local
county assessors. The exemption statistics for my county, Kitsap County,
WA., total 3900 and run about $11M/yr. These data are a function of using
the above income scheme. Clearly, absent the scheme, the number of
exemptions granted would be much more than 3900 and the cost to the county
much more than $11M as well. This additional loss of tax revenue is the
motive or incentive for counties to engage in the scheme.

The Dept of Revenue has both the rule making authority and the
administrative authority for this statutory exemption, not to mention the
incentive to increase revenue. Hence the ease with which this scheme can be
implemented.

Posted by 6p010536aab364970c at January 01, 2009 05:47 PM | Email This

Comments

1. The 'Scheme' is better said this way... Assessors may tell an applicant that they cannot offset any IRS defined income whether business income or capital gains income... with losses or depreciation expense. This instruction is actually contrary to law. Losses (except casualty and theft losses) are to be included. By giving applicants this false instruction, income is artificially increased and the tax benefit is reduced or denied.

Posted by: Bill Scheidler on January 1, 2009 09:09 PM