If you own a business in Pennsylvania you’ve probably, and recently, received one or more letters from the state demanding that you now reimburse them for various past “financial obligations.”

For example, just this week, I received a letter from a Harrisburg law firm telling me that a company I once owned must now remit to them the sum of $357.50.

It turns out that this amount represents not only the interest, but also an additional 25% “collection fee” (which goes to the aforementioned law firm) on top of the principal amount.

The original amount of my “obligation” (again, I have no way of even knowing if an obligation ever existed!) was all of one-hundred-seventy-one dollars. Apparently, it took them ten years to find this obligation --- as the $171.00 bill relates to a phantom Capital Stock and Franchise Tax from 1999.

I’ll save you the math --- this is less than half of what they are asking me to now pay. (The remaining $115.00 is what they call the “projected interest.”)

So, let’s add this up.

• I (allegedly) failed to pay the CS&FT a dozen years ago. (More on this in a minute.)


• The state then waited eleven years before demanding from me the principal, interest, and “collection fees.”



• And this may not be all that I owe, as there is also a very small note on the form letter that says, “Please note that the above amount may not include penalties and additional periods.”

  In other words, “We’ll be back for more.”

This letter was signed by a legal aide for a contract collections firm in Harrisburg. It was sent to a “Mike Quinn, CPA” at a firm that no longer operates. And while I have no way of even knowing whether or not a non-operating company that I once owned paid any CS&FT taxes, I do know that no one by the name of “Mike Quinn” ever worked for Ron Morris.

My accountant’s advice? Pay them anyway.

And it’s probably good advice if only because I have no way of going back that far to research the records of a corporation that, and as I already pointed out, no longer operates.

But the scary part is that the state could throw its next dart at the year “2006,” and simply repeat this process. This is why I am somewhat reluctant to even make this payment in the first place. I can assure you that any such payment made will be accompanied by a very strong letter, indicating that I’m not fighting this only because I have no way of defending myself.

Unfortunately, there’s a lot of this stuff going on lately. And not just at the state government level, even though the state is probably the single biggest offender of what I call the “Treasure Hunt” game.

Look, the state is broke. It has been broke ever since Ed Rendell decided to buy elections by, at least in part, handing out cardboard checks to each and every special interest group and/or mass-employer he could stomach. In all, Fast Eddie somehow ran up close to $4.5 billion in expenses over revenues (taxes).

For a while, the state fended off its day of reckoning. They first did this by “borrowing” from the tobacco settlement of 1999. When that money ran out they used the stimulus dollars that the federal government allocated for what it called “Shovel-Ready Projects.”

In my opinion, the only spade to touch those dollars was the one that shoveled taxpayer bucks to “friends of the state.”

The tobacco settlement is also a real kick. In all, some $203 billion was distributed to various state governments when the big tobacco companies admitted to their role in basically contributing to the deaths of tens of thousands of people who used their products.

Pennsylvania’s share of this settlement was roughly in the $11 billion dollar range, with Pennsylvania receiving these funds at a rate of approximately $400 million annually.

A recent audit by the State Auditor General Jack Wagner (a good man if there ever was one) said, and on March 4th of this year, “More than a billion dollars” of the tobacco settlement funds originally intended for health-related programs for Pennsylvanians had been, “quietly raided in order to balance the state budget” in recent years.

You see, in 2001 Pennsylvania lawmakers enacted a specialized bill that stipulated that “all tobacco settlement funds” be spent on some very specific health programs, including an insurance program for low-income adults called, “Adult Basic.” Auditor General Wagner is quoted as saying that the state legislators followed the spending roadmap for that bill until approximately 2005, when apparently the temptation to “use” them was just too great. Monies started disappearing into the state’s general fund shortly thereafter.

Another tobacco settlement program that took a hit, and according to Wagner, was a program designed to help people stop smoking as well as not start smoking in the first place. Approximately $1.33 billion was diverted from this program in yet another attempt to balance the budget.

But it now appears that all of these revenue sources are completely dried up. Now, it is on the backs of the taxpayers and businesses to balance the budget. (Notice I did not say legislators.)

By the way, the state of Pennsylvania is not only playing “throw the dart” at small business owners, but just recently it was announced that the state also intends to “deputize” employers to collect the local portions of employees’ earned income.

That’s right. Whereas employee taxes had previously been collected by local governments; someone, somewhere instead decided that it would now be more effective and efficient for small business owners to also take on this responsibility.

According to a 9/19/11 article in the Pittsburgh Tribune Review, “beginning in January, 2012, the state expects all of its business owners to begin collecting every employee’s local earned income taxes.”

Known as “Act 32,” this law is expected to become just one more pain in the neck for small companies.

With every shower comes sunshine, and the good news in this Act is that it will trim the number of state tax collectors from 560 to just 69. But remember that this is offset by the fact that, and starting in January, businesses must withhold and remit wage taxes for every one of their employees. Quoting Jerry Defrango, Vice President of Finance for SMC in Churchill, “Anytime a small business has to withhold and then pay a tax, it’s a burden.”

What Mr. Defrango is not saying is that the state’s enforcement people will punish offenders whenever those dollars are not properly withheld and distributed.

We can only hope that our new governor sees this madness and continues his cost-cutting ways. I have been personally encouraged by his willingness to hold the line on the draconian cuts he made when he submitted the state’s first on-time budget in a decade earlier this year.

I am also pleased that there have been significant cutbacks in state entitlements. When Jack Wagner was a guest on my radio show last March, he told me that even “reasonable” cuts in our welfare programs would go a long, long way toward balancing the state budget. We just needed someone with the courage to do this.

I don’t know about you, but I can smell it in the air. Companies are working harder than ever to just break even, and government agencies are taking more and more of these hard-earned dollars by employing tricks such as we have outlined here. As a fellow business owner and friend of mine said to me the other day, “Ron, I keep thinking about just taking the money I’ve saved and getting the hell out of here.”

I don’t know if “out of here” means “Pittsburgh,” “Pennsylvania,” or even “the United States.”

But in the words of Charles Henry Noll, sagacious ex-Steeler coach, “If you’re thinking about it, you really have already done it.”