TAX FERRETS

TAX FERRETS. "Tax ferrets" referred to individuals hired by cities or county boards of supervisors to look for properties that had not been assessed for taxes. (1) In 1900 supervisors in Polk County hired tax ferrets to find property owners who had been evading taxes. In five months the total property discovered was valued at $100,000 (equal to $3,000,000 in 2018). (2) Attorneys in Cedar Rapids used a supreme court decision from Minnesota to claim that supervisors had no constitutional authority to make contracts. (3)

A large number of Iowa counties employed tax ferrets despite complaints about their methods. Some counties had problems paying for the service. Ferrets were driven by the commissions they received. Prior to June 1, 1900 ferrets were paid commissions ranging from 25 to 60 percent. After June 1st, the commission was limited to 15% (4) According to state law, board of supervisors had no authority to pay out any part of the state tax or the school tax. The ferrets then often received all of the county taxes they recovered, but were still owed additional money. (5) The Dubuque Herald, in May, 1900, stated without explanation that the Waterloo Reporter was convinced tax ferrets could do as much harm as tax dodgers, (6) In May 1901 the Bremer County treasurer and county auditor both denied the authority of tax ferrets to sign and send out tax notices. (7)

Following the example of other Iowa counties, on August 22, 1900 the Dubuque County Board of Supervisors signed a contract after six ballots with W. H. Charters, of Sidney, Ohio. Competing offers had come from firms in Des Moines and LeMars. Charters agreed to pay all expenses including the cost of litigation for 15% of the taxes paid into the treasury. (8) On December 24, 1900 the district court in Polk County rendered an important decision. In the first case covering all the issues surrounding the constitutionality of the collection of back taxes being collected on concealed property, the judge found the practice constitutional. (9)

Before adjournment on June 7, 1901, the Dubuque City Council instructed the city attorney to prepare an ordinance enabling the council to hire tax ferrets. (10) It was the intent of the council to limit the length of the contract to two years so that the ferrets could do their quickly. (11)

By August, a problem had developed. Mayor Berg announced that he had found a flaw in the contract, a claim dismissed by City Attorney. Berg claimed that a clause, inserted at the request of the council, describing the time of the contract made it perpetual. A meeting held in the city attorney's office had seemed to settle the matter. The mayor, however, discovered the city attorney had told the City Recorder that the mayor could be forced to sign. This infuriated Mayor Berg who refused to sign until satisfied by the language. (12)

The Davenport Democrat on August 21, 1901 published part of a letter from Mayor Berg to Mayor Heinz of Davenport. Berg was quoted as saying he thought the position of Mayor Heinz and City Attorney Thuenen was sound. They believed that special charter cities had not been given the authority to contract with ferrets. (13) The council met on August 22, 1901 with the issued unresolved. Mayor Berg stated he would ask City Attorney Duffy for an opinion as to the legal right of cities under special charter to hire tax ferrets. (14)

In November, 1901 the largest amount yet filed against an individual was announced by the supervisors. Edwin W. ALBEE was ordered to pay $5,000 in back taxes. (Equal to $150,000 in 2018.) The newspaper reported that "other wealthy city residents have been seen before the agents." (15)

The city council's Committee of the Whole Report which favored hiring tax agents was voted down in December, 1901. The question was to be put to the electorate in the municipal election in the spring of 1902. (16)

In 1902 the ferret law was judged entirely constitutional. (17) Those attempting to stop or modify the ferret laws in the legislature failed in their mission in that year's session of the Iowa Legislature. (18)

A contract with the Dubuque city council was eventually signed. In 1911 concern developed that renewing the contract would hurt the Great Dubuque movement. In an editorial in the Telegraph-Herald, examples of Waterloo which in ten years had seen its population increase 112% and Des Moines were pointed out. Both cities had tax ferrets at work every year. The editorial explained that the fear of discovery tended to lead to investments in real estate and untaxed stocks of local industry. (19)

In 1911 the Iowa Senate passed a plan developed in the House to substantially repeal all provisions for the employment of people in any capacity to assist in collecting taxes on property. The bill also made it a misdemeanor for any official of any city or county to employ anyone to assist in discovering omitted property. (20) The bill became law. The era of tax ferrets in Iowa had ended.

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Source:

1. "Tax Ferrets," The Law Dictionary. Online: http://thelawdictionary.org/tax-ferrets/

2. "How Tax Ferrets Work," The Dubuque Daily Herald, September 1, 1900, p. 6

3. "Contract is No Good," The Dubuque Sunday Herald, September 9, 1900, p. 5

4. "Hard on Tax Ferrets," The Dubuque Herald, June 29, 1900, p. 2

5. "Iowa Notes and Comments," The Dubuque Herald, March 2, 1900, p. 4

6. "City Briefs," The Dubuque Herald, May 20, 1900, p. 5

7. "Tax Ferrets Have Trouble," The Dubuque Daily Telegraph, May 20, 1901, p. 1

8. "Tax Ferrets Engaged," The Dubuque Herald, August 23, 1900, p. 4

9. "Tax Ferrets Sustained," The Dubuque Herald, December 25, 1900, p. 3

10. "To Engage Them," Dubuque Daily Telegraph, June 7, 1901, p. 3

11. "Discovers Flaw," Dubuque Daily Telegraph, August 3, 1901, p. 3

12. "Will He Sign It?" Dubuque Daily Telegraph, August 5, 1901

13. "Seen and Heard," Dubuque Daily Telegraph, August 21, 1901, p. 5

14. "Tax Ferret Coming Up," Dubuque Daily Telegraph, August 22, 1901, p. 3

15. "Asked to Pay Large Sum," Dubuque Telegraph-Herald, November 30, 1901, p. 6

16. "Second Iowa Year Book," Dubuque Telegraph-Herald, June 1, 1902, p. 1

17. "Voters Must Decide," Dubuque Telegraph-Herald, December 6, 1901, p. 7

18. "Has Finished Its Work," Dubuque Telegraph-Herald, April 20, 1902, p. 1

19. "Tax Ferrets and a Greater Dubuque," Telegraph-Herald, February 7, 1911, p. 4

20. "Tax Ferret Law Hit," The Telegraph-Herald, February 16, 1911, p. 1