THE BLOG
06/09/2010 10:45 pm ET Updated May 25, 2011

New York Aggressively Pursues the Unemployed with Tax Warrants

If you're unemployed in New York and couldn't pay your 2009 taxes because you're, well, unemployed, New York State will slap a tax warrant on you.

If you don't pay up, because you're, well, broke, New York State will go after your bank account, your house, or your car--or refer your account to a debt collector.

"This is terrible," says Andrew Stettner, deputy director of the National Employment Law Project. "It shouldn't happen to anybody." Mr. Stettner says he'd never heard about the matter until called by this reporter.

In comparison to New York's policy, the Internal Revenue Service, faced with similar facts, classifies such tax debts "uncollectible".

In one sense, New York can't be blamed for being so hard on its unemployed. If only 25 percent, or 196,475 of the state's 785,900 jobless, couldn't pay typical tax bills of about $1,000 each -- and if the state collected 100 percent of those taxes owed -- it would mean $196.47 million dollars.

On the other hand, New York's all-in 2010-2011 budget is $79.9 billion, and it projects total receipts, including federal funds, of $133 billion -- $84.75 billion in state taxes and miscellaneous receipts. This makes you wonder why the state feels it needs the extra $196 million.

Besides which: If the state did get the money it's owed from the homes, cars, or bank accounts of those 196,475 people, the state economy would take a proportionate hit, and the state itself would net that many fewer dollars in future taxes, because people who take a financial hit in such circumstances are that much less likely to spend.

The exact number of people likely to be affected by New York State's aggressive policy are unknown. So is any projected amount the state may recover, since some people will be able to borrow, or sell personal property, to pay New York what they owe.

Nonetheless, this all means that New York is willing to harm substantial numbers of its citizens, and incidentally ruin any credit they may have, for what amounts to a tiny tax bill. How many would become homeless is a matter of speculation. This, at a time that the benefits of many unemployed are running out, and will not be extended by Congress.

So is it state policy to lean so hard on some of its most-pressed citizens, in the process limiting its own future revenues?

"It's true that unemployment insurance is treated as earnings," says a spokesperson for the New York State Department of Taxation and Finance. Filing a tax warrant and taking the other steps outlined above "Is part of our collection process, and if you have a question, or an inability to pay, you can contact the department, and we can work with taxpayers in terms of setting up a payment plan."

Of course, in a payment plan, otherwise known as an "offer in compromise", the taxpayer makes a good faith offer to pay a part of their liability -- and pay it on schedule. If they miss a payment, all bets are off, and the creditor -- New York State, in this case -- can act accordingly.

In the interests of full disclosure: This reporter stumbled across this story when he received one of these tax warrants from New York State.