By Colleen Quinn
STATE HOUSE NEWS SERVICE
BOSTON -- Delinquent Massachusetts taxpayers who cough up back taxes would get a break from paying penalties, under a Republican amendment set to receive consideration during House budget debate next week.
Although the proposal has surfaced frequently over the years, Republican leaders think the plan has a good shot of passing the Democrat-controlled House this year because it has been a few years since the state attempted to collect outstanding taxes with an amnesty program. House Minority Leader Bradley Jones (R-North Reading) says it's time to cash in on uncollected revenue from individuals and businesses.
As of early March, approximately $3.1 billion was outstanding in unpaid state taxes from individuals and corporations. Of this amount, $1.5 billion is in litigation or bankruptcy, and therefore unavailable for amnesty, according to a spokeswoman for the Department of Revenue.
Republicans contend that foregoing penalties is a way to entice people and businesses to pay, and it is a better option than never collecting the outstanding taxes. Tax disputes can be tied up in the courts for years, according to proponents of tax amnesty.
"You don't know how fast you are going to get this money. You don't know if you are ever going to get this money," Jones said. "It worked successfully on three previous occasions."
The last time delinquent Massachusetts taxpayers were offered an incentive to pay up was in fiscal year 2010 when the state pulled in $32.6 million in unpaid taxes from an amnesty program. Prior to that, the state collected $32 million in back taxes in fiscal year 2009, and $102.8 million in fiscal year 2003.
Timing has to be right to offer breaks for unpaid taxes, Jones and other advocates of the idea said. If amnesty is given too often, it loses effectiveness because it becomes part of people's tax planning. Opponents of tax amnesty argue it encourages individuals and businesses not to pay their taxes on time.
A handful of other states looking to boost revenues offered amnesty programs last year with some seeing tax collection windfalls. Louisiana's tax amnesty program brought in roughly $435 million to state coffers last year. Other states that saw back taxes flow in were Connecticut, Arkansas, Iowa, and Delaware.
Jones said he broached the subject with House Ways and Means Chairman Brian Dempsey, the Haverhill Democrat who is charged with crafting the House budget. Jones said Dempsey indicated it would be something he would be willing to look at. A similar proposal filed last year failed to win support, and Dempsey could not be reached for comment.
Under the pending proposal, taxpayers who owe would have a two-month grace period to pay taxes and interest without incurring penalties. A portion of the taxes collected would be earmarked for opioid addiction programs, up to $20 million, and the rest would be steered into the general fund, under Jones' amendment.
Deidre Cummings, legislative director at MassPIRG, said the public interest research group does not have a position on the tax amnesty proposed for the state budget. But the organization opposes a move in Congress to give U.S. multinational corporations an opportunity to bring offshore profits into the United States tax-free if some of the money is used to buy bonds in an infrastructure bank.
Cummings said the proposal in Congress incentivizes bad corporate behavior, and added the state budget amendment is different than what is being considered in Washington.
"On the one hand it creates a disincentive toward compliance," she said, referring to the state budget amendment. "On the other hand it gets taxpayers back on the books and on the rolls, and hopefully paying taxes timely in the future."
Cummings suggested taxpayers who have taken advantage of previous amnesty periods should be ineligible, as a safeguard to prevent delinquent taxpayers from waiting for an eventual break.
"That protects everyone then who pays their taxes on time, on a regular basis, so that it is not being used as a regular tax planning tool," she said.