Friday, November 18, 2005

Tax Amnesty Triples Expectations

Gov. Mitch Daniels’ tax amnesty program has yielded nearly three times the amount of money originally estimated. At least 68,000 taxpayers coughed up about $200 million in delinquent taxes. The State, however, has foregone about $30 million in penalties and fines due on these delinquent taxes, and it will pay at least $12 million to cover the cost of administering the program, including a substantial payment to a provide contractor which aided in the effort. The net collections from the program are likely to be closer to $160 million.

Democratic legislators are already making plans on how to spend the windfall. “Now that the governor has shown his devotion and bent over backward to help tax cheats in this state we're hopeful that he uses that money to provide assistance to schools, property taxpayers and other people who've been suffering under the effects of the budget he helped pass through the General Assembly last session,” Rep. John Schorg told WISH-TV.

Gov. Daniels for his part wisely plans to use the money to balance the budget. Legislators should not treat these funds as a windfall to be spent. This is a one-time revenue gain so it only makes sense to spend the money to pay the state’s current bills rather than looking for new ways to spend it.

Tax amnesty programs have become a popular gimmick for cash-strapped states to plug holes in their budgets. Tax amnesty is not, however, fair to the law-abiding taxpayers who promptly pay their taxes when they are due. These programs simply reward taxpayers for being scofflaws. This program may help the state with its current budget woes, but it is bad tax policy which should not be repeated.

3 comments:

kay said...

A significant number of 68,000 taxpayers making use of the tax amnesty program where neither tax cheaters or scofflaws. Many were taxpaying individuals who had lawfully filed tax returns and where currently paying their lawfully assessed taxes along with additional interest and administrative fees by way of monthly installments to the State. The fact that some taxpayers using installment payments found a more cost effective means to pay their tax bill in-full is no different than an individual who finds means to pay-off a high-interest-bearing credit card balance. So how exactly do you arrive at the conclusion that everyone participating in the tax amnesty program were tax cheaters or scofflaws?

Perhaps you meant to opine that it is unfair to law-abiding taxpayers when TAX EVADERS—those that intentionally avoid tax payment by not declaring taxable income or refuse/default on tax payments—are allowed the opportunity to participate in a tax amnesty program. If that was the case, than yes, Governor Daniels (R) program was bad tax policy, unfair to law-abiding taxpayers and should not be repeated using standards which turn a blind eye to the very serious offense of TAX EVASION.

P.S. Do you know if Daniels slippery slope mentality is going to be used to recover unpaid traffic ticket fines?

Advance Indiana said...

Kay,

If you take a look at the Department's original press release on the tax amnesty program, it reads: "Amnesty is available for taxpayers who did not file required Indiana tax returns, have under-reported tax liability, claimed excessive deductions, or did not pay previously assessed taxes, interest, penalties or collection fees for tax periods ending before July 1, 2004." It clearly encompassed tax cheats; the category of intallment payers is but one category. I would also point out that, even among installment payers, you have people that were assessed more taxes as a a result of an audit (typically by the IRS) and were in the process of repaying those taxes.

I don't know what Daniels' plans are with respect to traffic ticket fines. Marion County's court systems, of course, just announced its own plan to go after those scofflaws this week--a part of those collections go to the state, as well as local governments.

kay said...

Gary?

Absolutely, the tax amnesty program as you now state, “clearly encompassed tax cheats.” However, your original post did not encompass that qualifier. Thus, my comment pointing out that NOT ALL tax amnesty program participants are tax cheats or scofflaws.

Again, my point was that the tax amnesty program benefited both those that were NOT tax cheats and those that WERE tax cheats. The fact that both were allowed to participate, in my opinion, was exactly the flawed plan Daniels used to install the backdoor that allowed Indiana’s real lawbreakers (i.e., tax evaders) to escape; while providing ~some relief to those that were already in total compliance.

Certainly not a good policy standard set; one I’m sure hoping doesn’t roll-out elsewhere.