Public Service Was No Hassle for Dan Hassell
Seasoned SALT is devoted to catching up with former prominent members of the state and local tax community who have either retired or moved on to other work.
In this installment, Tax Notes State senior editor Doug Sheppard interviews Dan Hassell, who recently retired as Pennsylvania’s secretary of revenue, about his 41 years of service in state government.
While drumming on countless hits in the ’60s and ’70s, Hal Blaine was rarely in the spotlight as his rhythm propelled songs like “Be My Baby,” “Windy,” “Mrs. Robinson,” and “Indian Reservation” into the popular music vernacular. But music connoisseurs knew better, with Blaine netting a Grammy Lifetime Achievement Award, a Rock & Roll Hall of Fame induction, and even underground accolades for solo albums like Psychedelic Percussion.
The Hal Blaines of the tax world are the long-tenured revenue agency experts who draft bills, perform audits, handle complaints and, ideally, make departments of revenue run smoothly and avoid controversy. They’re the ones who may earn the respect of colleagues and contribute to academic journals and panel discussions — but are rarely in the public eye.
Dan Hassell, who retired from the Pennsylvania Department of Revenue on January 6, was one of those people. In 41 years working for the state, Hassell wrote fiscal notes, helped refine legislation, advised on tax policy, spearheaded an update of the department’s technology, responded to countless taxpayer concerns, and oversaw 1,500 employees in his final role as secretary of revenue. His entire career was with the commonwealth — a rarity in a field in which state and local tax experts more often leave for the more lucrative pastures of industry.
“I had some offers and I never was really interested,” Hassell said. “I enjoy what I do, and I’m very grateful for the career that I’ve had. It’s not for everyone, but behind the scenes, what the general public may not see is that there are many, many dedicated public servants who come in every day and are doing their best to try to help people and to get things right. And they don’t get enough credit. They are the ones who really make the system work.”
From the Snow Belt to the Capital City
Born and raised in Erie, Pennsylvania, Hassell graduated as valedictorian from Strong Vincent High School in 1976. After obtaining a bachelor of arts degree from Westminster College in 1980, he went on to earn a master of science degree in public management and policy from Carnegie-Mellon University’s School of Urban and Public Affairs (now the Heinz School).
“It was a very technical education with a lot of accounting and statistics and some exposure to law, and a lot of focus on computer automation in public agencies and those kinds of things; they’re stressing the importance of IT and how to make use of that,” Hassell said. “And when they’re training soldiers, they tell soldiers that, ‘Well, this is the plan, but no plan survives first contact with the enemy,’ right? Those kinds of great technical skills may get you into a job, but to take the next step requires you to have people skills — to have knowledge of how things actually work in the real world.”
At Carnegie-Mellon Hassell learned how legislatures make decisions, how an agency processes tax returns, and how to account for tax revenue. More importantly, he met professor Dan Nagin, who was so impressed with his student that he invited Hassell to join his analytical team with the DOR in 1981, where the professor had just been appointed as deputy secretary for fiscal policy and analysis. As he did revenue forecasts and fiscal notes on pending bills, Hassell discovered that “there’s a lot of practical knowledge that goes into this business that you don’t get in school.”
By 1986, Hassell had parlayed his experience into a position “as sort of the tax guy” on the staff of the Pennsylvania Senate Appropriations Committee, which he held until 1995. That year, as Gov. Tom Ridge was sworn in, Hassell rejoined the DOR as its deputy secretary. He got comfortable in the role for nearly 15 years, until an unexpected development involving then-Revenue Secretary Stephen Stetler on December 15, 2009.
“There was a very dramatic moment where the secretary called all of us into his office and told us that he was being indicted and that he was stepping down,” Hassell recalled, “and the same day I got a phone call from Gov. [Ed] Rendell saying, ‘I want to make you the next secretary,’ which completely floored me, because I wasn’t expecting that phone call.”
Though Hassell returned to his deputy secretary position when Rendell left office in January 2011, another call came in 2017, when incoming Gov. Tom Wolf invited him to head the department again. It was during this time that the DOR made some of its greatest advancements under Hassell’s leadership.
The PATH to Reform
Not long after Hassell began his second stint as revenue secretary, staff approached him about potential issues with the state’s tax credit programs. This eventually led to his involvement on the senior executive board of the Information Sharing and Analysis Center (ISAC), an organization devoted to cyber and physical security.
“Some of the auditors in the department had uncovered what seemed to be fishy transactions using fictitious entities,” Hassell said. “That was the beginning of a long road in which we gathered evidence of fraudulent activity. Some people were using shell companies and fake documents in order to qualify for economic development tax credits, and then selling those credits — which you’re allowed to do in our system for cash — to legitimate taxpayers.
“And we took that evidence to the state attorney general, who then convened a statewide grand jury. And over the next couple of years, they worked with the grand jury, they issued indictments, and the grand jury issued a public report [in 2019] criticizing the state’s tax credit programs as not being designed to avoid fraud of this nature.”
The report also called for various changes, some of which the DOR was able to implement administratively. Reforms that couldn’t be handled via the agency went to the General Assembly.
“We had legislative hearings on that, and eventually there was a bill [H.B. 952] that passed that incorporated some of those ideas into the statute,” Hassell said. “So that experience very much raised all of our awareness of the risk that fraud poses in not just our tax credit programs, but really across the board. And that led to my interest in the ISAC and becoming a member of the board.”
Among other things, the ISAC has focused on combating tax refund fraud.
“The federal government — through the security summit — has been very successful in driving down the frequency of successful instances of tax refund fraud,” Hassell said. “So I think it’s a tremendously helpful effort that involves not just state government leaders, but also the software companies like Intuit, H&R Block, and similar companies — as well as the IRS — working together and sharing information about the latest fraud scheme through a confidential communication system, which allows all of us to be on the alert at all times about what is the latest fraud attempt in our systems. So that’s one of the things that I think we can point to as being largely successful at this point, and I’m proud to have been a part of it.”
And like other state tax agencies, the Pennsylvania DOR is now fully online. The effort started with scannable paper documents, 2D barcodes, and electronic payments — and continued during Hassell’s tenure with the Pennsylvania Tax Hub (PATH), which has involved transition to Fast Enterprises’ GenTax software for tax and revenue administration.
“We’ve had five rollouts into PATH — gradually moving more and more of our tax systems into it,” Hassell said. “And now, as of the end of November, that’s completed; all our tax systems now are centrally located into PATH. And that is a huge accomplishment to have completed that process in the last five years — fully integrated — and it puts us in much better position to be fully online as well.”
In turn, these efforts were part of Hassell’s goal of serving the public effectively.
“I feel like in the last six years, we have really accomplished a lot,” Hassell said. “It’s not just PATH that I mentioned, but other internal changes. We’ve reorganized the department to make the process more efficient. So now we have people who are organized around functions instead of around taxes. And we have spent a lot of time emphasizing the importance of customer service in tax administration.”
To Hassell, tax administration is as much a calling as it is a profession.
“Whenever I have the opportunity to talk to employees,” he said, “I emphasize the importance of what we do for our country. We are here to serve the public, and that’s not a political statement in any way — regardless of politics. Tax is central to a civilized society, I think, even though as Americans, we have always fought over taxes — starting with the Whiskey Rebellion and the Boston Tea Party. And at this particular moment, it seems like our nation is very divided and angry, and some people are just very cynical about their government and are ready to believe the worst about people who work for the government — especially those who make it a career.”
In Hassell’s view, the best way to counteract that cynicism is by providing exemplary service.
“What we’ve tried to do in my years here is to make it a priority to build public confidence in the agency, to try to surprise people with the good service that they get, to try to maintain the highest levels of integrity, and to try to do what we do as efficiently and as effectively as possible,” he said. “And finding that most citizens are at least trying to do the right thing or willing to do the right thing if we make it easy for them and if we help them to get it done. And it’s those people who we’re most focused on here, because that’s most people.”
According to Hassell, effective tax administration boils down to four principles: “The four things that I’ve talked a lot about are we have to get the tax right, we have to treat people well, we have to be fair, and we have to make it easy to comply. If we can do those things, then we’ll have done our jobs, and we’ll be much further ahead as citizens and as an agency.”
In the wake of the U.S. Supreme Court decisions in National Bellas Hess in 1967 and its upholding in Quill in 1992, states grappled with their inability to collect taxes on remote sales — as several efforts to compromise on a collection scheme with industry went nowhere. That changed with the Streamlined Sales Tax Project and the 2002 ratification of its resulting Streamlined Sales and Use Tax Agreement, which implemented a collection system for participating retailers in states in compliance with the agreement.
The Pennsylvania DOR had representation throughout the streamlined effort, but never adopted the agreement. Nonetheless, the Keystone State reaped the benefits when the Court handed down its Wayfair ruling in June 2018, overturning Quill and allowing remote sales tax collection on transactions lacking physical presence nexus.
Like a number of other states, the Pennsylvania DOR had reached a collection agreement with Amazon, but Wayfair was the “real sea change in terms of policy and our ability to make sure that sales tax doesn’t just become an afterthought and something that’s impossible to collect,” according to Hassell.
It’s not as simple as merely collecting tax, however, as the DOR had to implement its own system and respond to business queries regarding compliance — particularly from small vendors.1
“Even though we weren’t joining Streamlined, we implemented a system that basically subsidized electronic services for small retailers who we needed to comply with our tax but that didn’t have the resources to do it themselves,” Hassell said. “That is through a set of contracts with the Streamlined vendors in which to subsidize that relationship and doing that work for us, then they get a percentage of tax that’s collected. And so it works in a way that’s similar to Streamlined in terms of the mechanics of it, but we’re not subject to their uniform definitions and that kind of thing.”
Dealing with the Pandemic
Hassell and the DOR got to put that experience of resolving Wayfair issues — and perhaps even some of the additional revenue it raised — to good use in March 2020, when like everyone else on the planet it was faced with the question of how to deal with COVID-19.
“All of a sudden, one day, all of our offices are closed and we had to try to figure out how to run a Department of Revenue remotely,” Hassell said. “And at that point, we did not have enough laptop computers to give to everyone to work at home. We had some but not nearly enough. And those first few months were just one of the most stressful times that we’ve ever had.”
The department continued to deposit revenue that it received electronically, but checks were a different story.
“During that initial period, we didn’t have anybody in our check processing facility, so we weren’t depositing checks, we weren’t opening envelopes with tax returns, we weren’t equipped to run our business from remote locations — and all that had to change very quickly,” Hassell recalled. “There was a period there where we loaned out around 100 people to other agencies who needed people on the phone and actually were able to help them out. So we loaned people to the Department of Labor and Industry so that they could meet the huge demand for unemployment compensation services.”
After a few months and a lot of hard work,2 the DOR was able to procure enough laptops and put a virtual private network in place to communicate with its employees.
“During that period, we announced that most kinds of tax enforcement were going to be suspended,” Hassell added. “Most audits were put on hold — except for those that could be done remotely. And we shifted into a mode of trying to answer the phone and trying to help people as they were struggling with their businesses to try to continue to make their deposits of employer withholding of income tax and deposit sales tax that they had collected. If they were continuing to operate, they needed to be able to do those things.”
Opening envelopes and depositing checks were among the first in-person DOR functions that resumed in the summer of 2020.
“We needed that to happen, and so we started that operation back up in the summer of 2020 on multiple shifts to try to allow for as much social distancing as possible,” Hassell said. “Whereas before, everyone would be in the building together. With two or three shifts, you could spread people out more — and things like that. That was critical to the commonwealth’s fisc to go back to depositing those checks as they came in.”
This was followed by the opening of field offices on an appointment-only basis in late 2020, as well as the return of in-person audits in 2021. The DOR still has a long way to go on its staff re-entering the workplace, however.
“Something like 80 percent of our employees at this point are still full-time remote,” Hassell said. “Just recently, because of the transition to PATH, we had a critical date at the end of November, turning on PATH rollout 5. And so we’ve asked people to come into the office to make sure that they got their training and help, too, as they are learning the new system. So there have been more people in the office just recently, but that’s more of a temporary measure. We don’t know, of course, what the new governor will have to say about working from home. He may want to change that, but where we are now is mostly still working out.”
How to levy income taxes on remote workers will also need to be hashed out, particularly in states like Pennsylvania.
“Because we’re a state that borders New York state, which has a very aggressive posture on taxing our citizens who work either in person or remotely for a New York company, that’s a continuing problem that I hope gets resolved at some point,” Hassell said.
Fortunately for Hassell, complex issues like that are in someone else’s hands. For now, he’ll be content to merely spend more time with his wife, Ellen; three kids; and granddaughter.
“I’m sure that that will change,” Hassell said. “But this job is stressful enough that I feel like I need to step away from it a little bit and let the dust settle — and then see where we go from here.”
State taxation, of course, will continue to evolve — with the definition of nexus likely to be debated in the wake of Wayfair.
“The outstanding questions are whether states are going to be required by, say, federal legislation or by additional litigation to comply with some sort of common definitions or common process like Streamlined,” Hassell said. “It’s still possible that Congress could want to get involved and force the states into some sort of uniformity. And depending on how it’s done, that might not be a bad thing. The danger to the states is that Congress won’t stop there, and that they will take it upon themselves to foreclose the taxation of certain kinds of things as they as they have tried to do in the past.”
Wherever the issue lands, current tax officials might be wise to follow the advice of Pennsylvania’s outgoing revenue chief.
“As much as possible, keep it simple,” Hassell said. “I mean, the thing that many people justifiably hate about paying taxes is not so much the money; it’s when we make it harder than it needs to be. And if we kept ordinary taxpayers in mind when laws are being crafted and policies are being crafted to try to keep things as simple as possible, then we would all be better off.”
1 Pennsylvania has taken several measures to shore up sales tax collections, including a DOR discovery and compliance initiative launched via Sales and Use Tax Bulletin 2011-01 in 2011, as well as legislative passage and subsequent enactment of three laws:
• Act 84 of 2016 (H.B. 1198), which expanded the sales tax base to items delivered electronically;
• Act 43 of 2017 (H.B. 542), which required sales tax collection by certain marketplace facilitators; and
• Act 13 of 2019 (H.B. 262), which implemented the new economic nexus standard set forth in Wayfair.
According to DOR figures, Pennsylvania has collected an additional $5.4 billion in sales taxes thanks to these four measures.
2 “All those things had to be invented in 2020,” Hassell said.
|Subject Areas / Tax Topics|
Tax Notes State, Feb. 6, 2023, p. 541
107 Tax Notes State 541 (Feb. 6, 2023)
|Tax Analysts Document Number|