Tax Amnesty Programs Bring in Big Bucks For States

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Tax amnesty programs around the country are bringing in far more revenue than state officials expected, as taxpayers take advantage of the programs' waived fees and penalties to resolve unpaid back tax headaches.

Eleven states offered tax amnesty programs in 2003, and in some cases, states are collecting up to four times as much money as predicted, USA Today reported. In most cases, filers are given a specific time period in which to pay back taxes to avoid the late fees and penalties. The amnesty usually applies to income and sales taxes.

For example, Illinois offered amnesty to companies and individuals on unpaid state income and sales taxes this fall and collected $522 million, said Mike Klemens, spokesman for the Illinois Department of Revenue. Revenue officials expected to collect between $130 million and $230 million.

Klemens says that 68,000 of the 81,000 amnesty participants in Illinois last year were individuals, the rest businesses. The state spent almost $500,000 on a publicity campaign that told filers they would pay no late fees during the amnesty period, but penalties and interest would double if they did not.

And in Arizona, revenue officials expected $25 million, but collected $73 million when it waived penalties and offered lower interest rates to delinquent taxpayers.

Some taxation experts caution states that if they offer amnesty too often, scofflaws will be encouraged to ignore their tax bills and wait for the next amnesty.

David Brunori, professor of public policy at George Washington University and contributing editor of State Tax Notes, said amnesty programs are a good short-term solution, and "a way of getting money in the door quickly."

Brunori said the federal government has never offered a tax amnesty. "They're afraid to go down that road. The IRS is a far bigger bureaucracy. To pull it off administratively would be almost impossible."

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