US States Eager To Exploit Popularity Of The Tax Amnesty

by Leroy Baker, Tax-News.com, New York

07 January 2004

US State governments hungry for tax revenues to fill their emptying coffers have reaped a bumper harvest from tax amnesty programs in the past year, with eleven states waiving penalties and fees to those paying back taxes, figures have shown.

Statistics from the Federation of Tax Administrators reveal that states have received about four times more than they anticipated getting from tax amnesties, and in most cases have received an overwhelming response from taxpayers wishing to clear their debts.

Examples include that of Illinois where officials forecast a return of up to $230 million from an amnesty on unpaid state sales and income tax announced in the fall. However, confounding expectations, some 81,000 taxpayers came forward, paying back $522 million in taxes.

Similarly, Arizona collected $73 million from 4,700 firms and individuals where it expected to generate around $25 million in revenue. Massachusetts meanwhile managed to reap $172 million from a 60-day amnesty in 2002, which was extended into 2003 due to its popularity. Revenue officials were hoping to collect $43 million.

However, many tax experts consider the amnesty somewhat of a double-edged sword, encouraging taxpayers to be not as observant of the tax laws as they might otherwise be. “From a policy standpoint, it's a pretty good short-term solution,” says Professor David Brunori, a public policy expert at George Washington University.

Nevertheless, he adds: "It is not a panacea. Everyone knows you can't do it too often."

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