California's recently completed tax amnesty program has yielded more than $1 billion in revenue, nearly 12 times more than the state had originally anticipated, the San Jose Mercury News reported. The unexpected results of the amnesty program also shed the light on just how much money has been hidden in questionable tax shelters.
As states grapple with shortfalls and budget crises, experts say that California should be held up as an example of what can be done to raise revenue. Last year, the state passed the toughest tax shelter laws in the country and much of the amnesty revenue came from those who had hidden money in the shelters and were now paying up.
"You begin to wonder if this is the tip of the iceberg," said Assemblyman Dario Frommer, D-Glendale, who sponsored last year's bill giving California the nation's toughest penalties for tax-shelter abusers. "It does make you wonder whether there is large-scale cheating going on by some very wealthy and privileged individuals on these kinds of tax shelters."
The Voluntary Compliance Initiative was a four-and-a-half month effort that far exceeded the California Franchise Tax Board's expectations. The Board's original goal was to collect $90 million by April 15, a figure it revised to $275 million mark a week before the due date. As collections cruised by $300 million, the excitement began to build. By last Thursday, the number was at $838 million and the $1 billion mark was hit this past Monday with 50 more returns left to open and countless others coming in by certified mail, the Mercury News reported. State employees are equating the opening of envelopes to Christmas morning.
"It's kind of fun," said Denis Azimi, spokeswoman for the state tax agency. "You don't know what the next one will have."
California's $1 billion collection rate blows out of the water the $532 million collected last year by Illinois' amnesty program.
"It's a massive amount," Joseph Bankman, a Stanford Law School professor who helped shape the state's legislation, told the Mercury News. "It's one thing to get a half-billion or a billion from tens of thousands of taxpayers, but here you have less than 1,000 taxpayers and it's already over $1 billion."
With California's deficit hovering at $12 billion, the $1 billion collected with help, but it won't make a big dent. However, the new emphasis on penalties for questionable tax shelters should enhance the state's collections over time, Bankman told the Mercury News.
"People won't do these shelters in the future," Bankman said. California is "certainly the last place you'll be marketing these. It's like putting locks on the doors and hiring policemen. The promoters will go elsewhere."