The Modernization of State and Local Tax Agencies

August 29, 2023

By Ryan Minnick, Chief Operating Officer, Federation of Tax Administrators

Government modernization is always a hot topic and a worthwhile one. But the nature of the discussion may lead some to believe outdated processes and policies have left government agencies missing out on the many great waves of innovation the private sector has enjoyed for generations.

This could not be further from the truth and a close look at the work of state, city, and municipal revenue agencies proves the point, as they have and continue to be on the forefront of modernization efforts at every level.

The Federation of Tax Administrators (FTA) is a 501c3 non-profit serving tax and revenue agencies of all 50 states, the District of Columbia, and the cities of New York and Philadelphia.

FTA provides research and information exchange, training, and intergovernmental and interstate coordination to its members. FTA sees modernization as a never-ending effort that begins with greater emphasis on agile practices and continuous improvement – the sum of systems, processes, and people. Many of the advances have come about thanks to a shift from legacy technologies like mainframes and dated computer interfaces to more current and modular computing systems and software. As of 2023, more than 80% of the primary tax or revenue agencies represented in FTA’s membership have embarked on this journey with some going through the process for more than a decade.

The story of tax is one about revenue agencies playing the role of stewards of the public trust, administering most of the dollars that fund critical government services.  These public service professionals sit at the front lines of technology modernization and security, delivering commercial-quality call center wait times with limited budgets and staffing.

Tax Administrator Survey

To support the story of the tax and revenue agencies in the US, FTA has partnered with Georgia State University and EY to conduct an inaugural annual survey of tax administrators at the state and local levels. This survey, once completed later this fall, will be the first in more than a decade conducted from the government perspective.  The survey will be used to help all agencies tell their stories and articulate the value of their work.

A public summary report will be available later this year on FTA’s website, with insights related to the above innovations, trends in retention and recruitment, agency priorities, and a great range of other work being done to maintain excellence in tax administration.

Customer Service Innovations

Customer service is often the first thing taxpayers mention when asked about agency improvements they desire. Revenue agencies are answering this call by taking advantage of the latest cutting-edge technologies. Some agencies have rolled out chatbot technology programmed to assist taxpayers with basic questions, allowing phone agents to reserve their time for more complex conversations. Others have implemented common commercial-sector call-in features, giving callers the ability to:

• Be called back by the system at a later time.
• Maintain a conversation from agent to agent with a customer relationship management-style agent support database.
• Schedule a call for a specific time.

The combination of these modern techniques has led many agencies to reduce call wait times over the last five years, despite a marked increase in demand due to the closing of field offices and other walk-in counters during the pandemic.

Security Solutions

Customer service is just the beginning though. Taxpayers trust revenue agencies to handle their most sensitive information, and agencies take that trust seriously by deploying cutting-edge data security and risk management systems. Security threats like phishing attacks and fake emails attempting to steal taxpayers’ private information are perennial threats. As a result, revenue departments are constantly modernizing their compliance frameworks, internal controls, and dedicated resources for continuous monitoring and maintenance of confidential data security measures.

Equally if not more critical on the security front is the human firewall and ongoing education of agency staff and customers. Continuous security training keeps employees up to date on the latest scams, giving them the tools and knowledge needed to identify, defend, and act when a threat presents itself. Tax agencies also devote great time and resources educating the public on phone scams, email phishing, and other security attacks posing threats to tax agencies and their taxpaying customers.

Technology is moving forward at breakneck pace, and state and local tax agencies are at the front of the pack stride for stride. And they do so absent the funding of their private-sector counterparts. But where dollars fall short, staff innovation, creativity, and dedication to public service pick up and deliver. The required education, skills, and talent are in abundance within our state and local tax agency ranks. But what keeps these agencies a step ahead is their desire to serve their customers and communities. I know because I see it at every conference we host, meeting we attend, and every other exchange we are privileged to be part of working alongside these devoted specialists. Great technology starts with professionals ready to put forth the time and effort needed to succeed, and the state and local tax world is fortunate to have an abundance of these dedicated public servants.

The contents of this blog post reflect those of the author, and not necessarily those of the GFRC.