Federally funded grants were to be given automatically to a large number of small businesses, including restaurants, barber shops, and clothing stores. Only one caveat: these businesses must have filed their state income tax returns for 2018 and 2019. More than 7,200 businesses had not filed their 2018 or 2019 state income tax returns and were disqualified. This raises an old issue: Many Mississippi businesses fail to pay their taxes. The Department of Revenue doesn’t have the budget or manpower to audit and collect. “People who pay on-time are being abused” said Herb Frierson. He resigned as revenue commissioner shortly after reporting the COVID-19 grant tax issue, and just a few days after the Legislature reduced the Department of Revenue’s budget by approximately 5%. Frierson said, “It makes it seem strange that anyone pays at all.” “We don’t have enough auditors… We can see how big the problem is in the CARES Act grant matter.” With a Republican-controlled Legislature that opposes tax increases, and which has approved dozens tax cuts in recent years and vehemently opposed tax increases, delinquent tax collection could prove to be a significant budget boon. Frierson, like his predecessor, has lobbied for funding to hire more tax auditors. He claimed that the state could spend a few millions to hire more tax auditors. This would generate tens of thousands more revenue without raising taxes. However, lawmakers have been reluctant for the tax man to hire additional auditors. Frierson stated that “The Legislature doesn’t care.” They don’t want constituents calling to complain about taxes. They don’t care about the state’s lack of revenue. Morgan promised that the DOR would increase collection by $10 million in 2012. The collection grew by $81 million. In the following year, legislators reduced DOR’s budget. Although they technically authorized Morgan’s request for additional auditors, they didn’t finance them. Morgan complained at the time that “it doesn’t make economic sense… We collect money.” If this were a private sector operation, people would be asking for $10 million more. However, an economic slump, along with dozens of tax cuts that lawmakers passed, led to revenue shortfalls that led to drastic reductions in state agencies over many years, including DOR. Frierson stated that “Accounts receivable have fallen, so the board has reduced the accounts receivable section. This is how it would be described in business terms. Chris Graham, the new DOR Commissioner, declined to speak with Frierson. In a written statement, the agency stated that it has currently 100 district auditor positions and 31 vacant. The agency stated that it doesn’t expect to have to reduce staff further due to the Legislature’s 5% budget cut this year. Although no one seems to know the exact amount of uncollected taxes the state leaves on the table each year, Frierson stated that it is easily “tens to millions.” Morgan’s $81 million collection would seem to support this. According to DOR, the IRS estimated that the “tax gap” between owed and paid is between 15%-18%. DOR stated that more than 90% of 2020 state tax audits “reported a change in the taxpayers’ liability.” Frierson also said that local prosecutors in many areas are reluctant to prosecute tax fraud. This results in millions more uncollected taxes, and penalties. Frierson stated that although prosecutor go to Capitol asking for more money, they are reluctant to pursue tax cases that could make them more money. Trey Lamar (R-Senatobia), House Ways and Means Chair, stated that Frierson’s report that 25% of the CARES Act grants small businesses were disqualified from back taxes “raised eyebrows” among lawmakers. Lamar stated, “We have a problem in the state, especially with a lot cash-businesses who just aren’t pay taxes.” Lamar stated that he will help to address the problem and may consider approving additional DOR auditors. However, Lamar suggested that broader structural tax reform would be a better option. Philip Gunn, House Speaker, and other legislative leaders have long advocated for shifting state taxation away from income to “user-based,” such as sales or use taxes. Lamar stated that when dealing with large amounts of cash income, people will hide it and it can be difficult to audit. A sales tax is easier to audit, as it can be tracked through cash registers or other easy ways. However, efforts to shift Mississippi’s tax structure from income-based to consumption-based have failed. Opponents claim that consumption taxes are “regressive” and most disproportionately affect people with low or moderate incomes, which is most Mississippians. They also point out that Mississippi’s sales taxes are already high at 7%. Instead of expanding the base for consumption and sales taxes, legislators have over the years granted numerous exemptions and breaks to different groups and industries. Sometimes this was even possible for anyone who has a good lobbyist. This makes it more difficult for Mississippians to get a break from the tax burden. Lamar stated that a look at other states in this region shows that the ones that reduce or eliminate income taxes and shift towards consumption taxes have enjoyed booming economies. Lamar stated that Nashville, Tennessee is the fastest growing place in America. Lamar stated that consumption taxes are more fair and everyone must pay them. Lamar stated that even a street drug dealer with some cash in his hand will have to pay sales tax.