Vanderbilt Law Review

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Validly due and payable state and local taxes often go unpaid because the absent tax debtor chooses not to pay voluntarily and has no assets from which the tax debt can be collected in the taxing state. He often has assets elsewhere, but they may be difficult for the tax creditor to discover and to reach.

Only a few years ago out-of-state assets could not be reached at all, nor could the tax debtor himself be reached except within the taxing state, in its own courts, and by its own legal processes. Formerly, no state would use its law or its courts to enforce the penal or the revenue laws of another state. As to claims based upon penal laws, this inhospitality to some extent still persists, although the definition of penality for that purpose is being narrowed.' With respect to claims based upon revenue laws, however, the legal attitude has changed. As is often the case, this change was initiated by a few thoughtful common law courts and then was taken up by the state legislatures. Today it is generally possible for a state or its subordinate units to maintain tax collection actions in most of the sister states. Yet such revenue collecting lawsuits seldom are brought and are not always successful when brought.

Attempted evasion of tax obligations is no small matter, and movement from state to state affords a large part of the opportunity for it. Sales and use taxes normally are collected from sellers of goods, and an in-state seller can be investigated with reasonable thoroughness. Such an investigation often is not possible with out-of-state sellers, and it is probable that large amounts of use taxes are never collected from them.' Income taxes can be evaded by nonresidents who earn income in a state then remove themselves and the income before taxes can be collected, and also by residents who move from the state before tax collection. Moreover, withholding can reach only a portion of these absentees. Death taxes provide another of several examples of levies that can be minimized through interstate slippage. Personalty that should be sold to pay death taxes in the decedent owner's domicile can be removed after, or even before, the owner's death so that it cannot readily be reached thereafter.

Each instance of evasion increases the burden on every honest taxpayer, and the old idea that no state has any interest in another state's finances has long since lost whatever verity it once possessed. All the states face the same problem, along with the federal government. Mutual disdain serves no state's purposes and harms every state; the common interest clearly lies in mutual assistance in revenue-law enforcement, both among states and between the states and the federal government. Recognition of this inescapable fact is increasing, but not much has been effectively done about it.