Analysis: Amnesty to aid treasury, tax dodgers

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March 6, 2010

By PETER JACKSON The Tribune-Democrat Sat Mar 06, 2010, 11:18 PM EST

HARRISBURG — If you owe back state taxes, now isn’t the time to get right with the Revenue Department.

Pennsylvania plans to launch a tax amnesty program on April 26, so letting your tax debt gather dust for those few additional weeks could save you serious money.

During the 54-day amnesty period, all penalties and half the interest will be waived for businesses and individuals that pay off delinquent taxes accrued through June 2009.

For the cash-hungry state treasury, the benefit is a projected spike in tax collections that is expected to generate an additional $190 million to help offset spending in the fiscal year that began July 1.

Pennsylvania’s latest amnesty program was born during the political stalemate that held up passage of the state budget for four months, although it was overshadowed in news coverage by debates over legalizing table games at casinos and increasing taxes.

Its biggest impetus was last year’s hugely successful amnesty program in neighboring New Jersey, which raked in a record $725 million in six weeks.

“They hit the mother lode in Jersey,” said Senate President Joe Scarnati’s attorney and spokesman, Drew Crompton, who helped craft the amnesty legislation.

Pennsylvania’s last amnesty program, in 1995-96, waived penalties but required full payment of taxes and interest.

This year’s no-penalty, half-interest offer, based on New Jersey’s program, is designed to entice more delinquents to pay up.

“It’s a better deal than the last time,” said Revenue Department spokeswoman Stephanie Weyant.

But delinquents still will pay more than they would have had they paid on time, Crompton added.

Another provision provides an extra incentive for taxpayers previously unknown to state officials to come forward in the amnesty program.

Those taxpayers will not be held responsible for taxes due before July 2004. In exchange, they will have to supply the department with the information it needs to tax them going forward.

“You get them on the (tax) rolls, you find out where they are,” Crompton said.

Tax delinquency is a chronic headache for state government, which collected about $700 million in overdue taxes, penalties and interest in 2008-09 and $900 million the year before that.

Vigilant enforcement is crucial – not only to maximize revenues but to promote respect for tax laws.

Critics of such amnesties say they can undermine tax law compliance if used too often.

“It encourages cheating, basically,” said staff economist Mark Robyn of the Washington-based Tax Foundation, a nonpartisan tax research group. “It leads you down the road of having to do more amnesties in the future.”

Fourteen years have passed since Pennsylvania’s last amnesty program – much longer than many other states have waited.

And the program contains sticks as well as carrots.

For example, participants who fall into tax delinquency within two years after the program may be required to pay the full penalties and interest that had been waived.

Also, once the amnesty period ends, a special, “nonparticipation penalty” of 5 percent will be levied against delinquent taxes, penalties and interest not paid in full.

And all of this year’s participants will be barred from any future amnesty programs.

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