Thursday, December 18, 2008

For Tax Cheats, Meltdown Prompts Amnesty Offers

From the Associated Press:

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, 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 October.

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.

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, spokeswoman for the Federation of Tax Administrators.

Many states are reluctant to offer amnesty, arguing that its rewards cheaters, discourages honest taxpayers and poaches revenue the states will collect in the future — especially as they improve the databases they use to catch delinquents. They worry, too, 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 Warren of the California Legislative Analyst's Office. "You can have a breakdown in compliance."

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