Turns out it’s a pretty good time to be a tax cheat.
Desperate to bring in revenue in the middle of a recession, states across the country are adopting tax-amnesty programs similar
to one Indiana had three years ago, offering to let people pay their past-due tax bills with little or no penalties or interest.
"Something is better than nothing," said Dino DiCianno, executive director of the Nevada Taxation Department.
DiCianno said Nevada gave up more than $14 million in penalties and interest to collect nearly $41 million between July and
Oklahoma, like Nevada, generated about twice as much as it expected from its offer of amnesty, raising $82 million through
its 90-day Clean Slate program for businesses and individuals.
New York has a program under way, and Connecticut and Massachusetts are drawing up theirs. California debated one before rejecting
it in favor of stiffer penalties. Delaware’s incoming governor campaigned on the idea. A similar program is being considered
for Louisiana when its lawmakers return in April.
Indiana held the only tax-amnesty period in its history for three months in 2005.
The state gave individuals and businesses who owed back taxes a chance to pay their state bills without penalties, interest
or collection fees. The program netted about $245 million.
Republican Gov. Mitch Daniels stressed at the time that the program was a onetime grace period that would not be repeated.
Daniels’ spokeswoman Jane Jankowski says his position on the issue hasn’t changed. Some lawmakers never liked the idea, and
there hasn’t been talk of another amnesty period.
State after state is facing a disastrous drop-off in tax revenue because of the stock market collapse and the recession. Many
states have already cut their budgets and started laying off employees.
"Anything you can do to speed up cash flow is cheaper than your alternatives, like borrowing," said Verenda Smith,
for the Federation of Tax Administrators.
When Indiana’s amnesty period started, the state was owed about $1.3 billion. In 2006, Indiana was still owed more than $1
billion in delinquent taxes. But the Department of Revenue has been working to bring those numbers down, agency spokeswoman
Stephanie McFarland said.
Last year, the state collected $13.3 billion in revenue and had $551 million outstanding. Even as collections rose to $14
billion in 2008, the amount of delinquent taxes fell to $533 million, McFarland said.
Many states are reluctant to offer amnesty, arguing that it rewards cheaters, discourages honest taxpayers and poaches revenue
the states will ultimately collect — especially as they improve databases they use to catch delinquents. They worry,
that people will hold back on their taxes and simply wait for the next amnesty.
"If the attitude is we’re going to hand out get-out-of-jail-free cards, people’s attitudes can change," said Paul
the California Legislative Analyst’s Office. "You can have a breakdown in compliance."
An Oklahoma City lawyer challenged his state’s amnesty program all the way to the state Supreme Court, arguing that the
Oklahoma Constitution prohibits forgiving a state debt. The court rejected his claim in a one-sentence ruling.
"It is a slap in the face to all law-abiding Oklahomans who pay their taxes as required by law," said lawyer Jerry
New York, which has a $1.5 billion deficit, began a limited amnesty last January that covers income, corporate and sales taxes.
The state has collected $11 million so far and hopes to take in $30 million.
Connecticut Gov. Jodi Rell has warned that the state faces nearly $6 billion in deficits over the next two fiscal years. The
state is hoping to generate $40 million by instituting a 56-day tax amnesty program next spring.
It will let taxpayers pay their late state taxes without penalty, and with a 25-percent reduction in interest.
"States are trying to reach for every tool in the toolbox right now," said Connecticut Senate President Pro Tem