Faced with a slumping economy and likely big cuts in federal aid, state legislators are once again weighing whether to turn delinquent taxpayers over to collection agencies — and block renewal of their driver’s licenses or vehicle registrations.

But the measure also is sparking pushback from groups that say it unfairly targets the poor even as Connecticut treats wealthy delinquent taxpayers with kid gloves.

“If we want people to work and pay off tax debt, we can’t take their driver’s license in the meantime,” said Jeff Gentes, a lawyer with the Connecticut Fair Housing Center specializing in fair lending and foreclosure issues. “It’s an abuse of government power.”

Violette Haldane, executive director of Advocacy to Legacy, a Hartford nonprofit that teaches youth leadership and civic engagement, said the bill pending before the Finance, Revenue and Bonding Committee is “very punitive.

“And to take away someone’s driver’s license [when] that has nothing to do with driving, nothing to do with safety, just seems so wrong.”

The bill raised by the committee is designed to whittle down state government’s estimated $3 billion tax gap — the margin between what it’s owed and what it currently collects.

Gov. Ned Lamont’s administration reported the 2022 tax gap in January as directed by the legislature. It also notified legislators that the Department of Revenue Services is facing a real challenge in resources.

DRS Commissioner Mark Boughton said the department is seeking authorization to hire attorneys to help with collections from delinquent taxpayers who have left Connecticut. Boughton said the state faces “thousands of thousands” of cases like this, with an aggregate outstanding debt of about $258 million.

But critics note the committee’s bill is much broader in scope than the tax department’s current request.

First, it authorizes DRS to contract with collection agencies as well as with lawyers. Second, they can use these to pursue delinquents residing both in and out of Connecticut.

Legislators balked three years ago when the Lamont administration sought permission to sell delinquent tax debt to private collection agencies.

The Internal Revenue Service’s Taxpayer Advocate Service, an independent office within the IRS, classified privatized collections as one of the IRS’ “most serious problems” in its 2017 report to Congress.

About 44% of all taxpayers targeted by private collection agencies on behalf of the IRS “are at risk of economic hardship,” according to the report. And the median income of households targeted by collection agencies that later entered into installment agreements to repay their debt was $38,021 per year.

“With unacceptable frequency,” the Taxpayer Advocate Service added, “taxpayers whose debts are assigned to PCAs [private collection agencies] are placed in installment agreements they cannot afford.”

Critics also noted that while Connecticut continues to explore using collection agencies that target poor households, its history with wealthy tax delinquents is marked by extreme patience.

The state offered seven tax amnesty programs — a benefit typically used by households and businesses that can afford specialized legal counsel or accounting services — between 1990 and 2021. That means once every 4.6 years, on average, the state waives certain penalties on overdue filers to enhance revenue collections.

Besides raising the issue of collection agencies, the new legislation also stipulates that once a filer’s tax payment is overdue for 30 days, the state would notify that person that in another 60 days, the delinquent status would be reported to the Department of Motor Vehicles.

The license wouldn’t be suspended. But unless the taxpayer successfully appeals the matter, the DMV “shall not issue or renew” that person’s license or vehicle registration until delinquent taxes, including interest and other penalties, have been paid.

Gentes, who also supervises a clinic at Yale Law School, said that provision — like the option to employ collection agencies — is designed chiefly to intimidate low-income residents who lack the resources to overcome a temporary loss of transportation.

“We should not be using government to punish poor people,” he added.

The committee drafted the measure largely in response to the administration’s tax gap report. But, according to that report, most of Connecticut’s tax gap isn’t tied to the low-income households that, critics say, the bill would target the most.

According to that analysis, nearly 80% of Connecticut’s uncollected taxes involve under-reporting of income, a problem typically connected with businesses and households that can afford tax attorneys and accountants. 

Another 14% involves filers who don’t pay the full amount they claim to owe, and 6% involves those who don’t file altogether.

Complicating matters, the department’s contingent of auditors, who are essential to targeting underreporting, has been shrinking for more than a decade, according to the tax gap report.

DRS had 228 auditor positions this fiscal year, down 20% since 2012 and 11% since Lamont became governor six years ago.

Boughton said most states audit 3% of tax returns each year. Connecticut audits less than 1%.

Rep. Maria Horn, D-Salisbury, co-chairwoman of the Democratic-controlled committee, said the measure remains a work in progress, adding that she and others on the panel have several concerns. The finance committee must complete action on all bills it had raised by Thursday.

Horn said while Connecticut should seek ways to recoup delinquent tax dollars, particularly from taxpayers who leave the state, it cannot craft a system that targets one income group. She added that the need for more auditors to tackle the largest portion of the tax gap also must be addressed.

“I do believe DRS is understaffed,” she said.

Rep. Joe Polletta of Watertown, ranking House Republican on the finance panel, said he also wants lawmakers to make a serious effort to reduce tax delinquency — but in a fair manner across all income groups.

“If you owe a single dollar to the state of Connecticut, you should pay in a timely manner,” he said. “No one should get preferential treatment.”

But Polletta said he thinks withholding driver’s licenses for tax reasons only will make it harder for many households to pay what they owe. And he noted DMV Commissioner Antonio Guerrera testified before the committee that administering the withholding of driver’s licenses and vehicle registrations would be a burden on the agency and should be stripped from the bill.