"We're not interested in fair: we're in the collection business" - a story for Gov. Tom Wolf.


This is my 15 year old, true story about a personal experience with new taxes in Pennsylvania.  As Governor Tom Wolf proposes the largest tax increase in State history, I think it's time to recount this story, as I believe Pennsylvanians need to understand what taxation really does to small business.


In the mid 1990's* Pennsylvania was thinking of rolling out a new tax on services, and most specifically interesting to me, Landscape/Lawn services were amoung those effected.  I was the owner of a fast-growing, landscape contracting business in those days, located in Montgomery County.  I wasn't thrilled about the tax, but I could understand why the state might want to tap into those dollars.  I understand that as a contractor, I use the roads to move my equipment, and I'm willing to do my share to pay for those things I use.  Although I wasn't happy about the new tax; I was open to the idea.

My main concern was "renegade" contractors that might not share my sense of civic duty.  These were the "Mom and Pop" outfits that are often times Teachers or other "semi-pro" operations. These folks operate more for spare cash, than for a living.  I had 40 guys that I had to pay, so I needed a fairly level playing field, in order to be competitive.  I felt I ran a very efficient operation, and on a fairly level playing field - I got a majority of the work I bid.

However, this tax had the potential to put my "level playing field" at a 6% pitch. That is, as an employer, playing by the State's rules, and possessing a Tax Payer ID#, I was duty bound to pay this new tax.  Those "renegade folks"...not so much.  They were not going to pay tax, and that puts me 6% behind those folks before I even get to the bid meeting.

So I set out for Harrisburg, where a conference was being held on the proposed legislation: to express my concern.

Once I got to the conference, the author of the proposed new tax was there to take questions and help landscape professionals smoothly implement this tax into their businesses.  He did a Powerpoint, which was as exciting as you might imagine, and the focus was implementation - of course.

At the end, there was a Question and Answer period.  This was my chance.  I stood up, expressed my concerns and even suggested possible ways to keep the "playing field level" for those of us willing to comply.  I suggested licenses be assigned to tax paying organizations, and that those numbers must necessarily be displayed on the work vehicles.  But assigning such numbers, the industry could "self regulate" and report those that were "renegade".  This would be a win for both the state and the Contractors, as it gave contractors the level playing field they deserved, and it gave the state potential new revenue sources: that would have otherwise never complied.

I will never forget the answer this guy gave me.  He said, "Yes, that sounds like a solution to a problem that could arise.  But, there would be administration involved in that process, that we just AREN'T INTERESTED in getting involved with implementing.  You see, we're not interested in administration, we just want to be in the collection business."  And with that, he moved on.

My jaw hit the floor, and the meeting went on.  Within a year, I was paying the tax.  No numbers were assigned to taxpaying companies.  I started every job from that point on, 6% behind most of my competition.  The number of contracts I successfully bid, began to fall.


Results and Consequences

Fast forward 5 years...  

My partner makes a dubious decision that results in some hard times for me and my company.  Payroll piles up.  Cash is super tight, but I'm fighting to survive.  A year of fighting goes by, and in order to meet payroll and other expenses, the new tax is not being sent in a timely manor.  A balance begins to grow quickly.  Before long, that balance get large.  This is balance that I know most of my competition, is not even paying.

When I call the state, to discuss the matter, there is no understanding, deferment, or plan in place to help a company that is experiencing difficulty.  Instead, a letter comes that expresses an "Intent to levy".

I have no choice but to liquidate capital to pay the balance.  I sell trucks and other equipment to try to satisfy this balance.  The balance is now TWICE as large as what the collected taxes have generated, because the state has found it necessary to heap loan-shark sized amounts of penalties and interest onto these taxes due.

My employees lose their jobs.  Inventory is liquidated at a loss to service this balance.  Eventually, I take an offer and simply sell the business outright.

To this day, I still deal with this unfair tax that the state decided to put on people that wanted to "do their civic duty", and contribute.  The state decided to lean my home, when they were worried they wouldn't get paid.  And even though the taxes due, have been paid off many times over, the lean is very slow to be removed.

This isn't fantasy.  This happened to me.  From 40 employees to zero employees.  But I guess when you are just interested in being in the "collection business" it doesn't matter.  This is how new taxes help people.  

I hope you are listening Gov. Wolf.


The business as we were racking up our sales tax debt.  All these guys and ladies lost their jobs.

The business as we were racking up our sales tax debt.  All these guys and ladies lost their jobs.

Information about the tax that was levied:
http://www.pacode.com/secure/data/061/chapter55/s55.6.html

*Authority
   The provisions of this §  55.6 issued under section 270 of the Tax Reform Code of 1971 (72 P. S. §  7270).
Source
   The provisions of this §  55.6 adopted August 4, 2000, effective August 5, 2000, 30 Pa.B. 3935. 

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