January 5, 2010
BankRate.com Interviews Tax Foundation Staff Economist Mark Robyn on Tax Amnesties
"Cash-strapped states turn to tax amnesties"
By Kay Bell
Revenue problems for states could be a blessing to some taxpayers. State tax collectors, looking to bring in as much money as possible with the least possible effort, are turning to tax amnesties. Amnesties enable delinquent citizens to come clean about their tax transgressions, pay the due amount and receive exoneration for penalties and interest.
In 2009, amnesties were offered in Alabama, Arizona, Connecticut, Delaware, Maryland, Louisiana, Maine, Massachusetts, New Jersey, Oregon, Virginia and Wisconsin.
In 2010, a couple more state amnesties will soon be underway. ...
But Mark Robyn, an analyst with the Washington, D.C.-based Tax Foundation, says amnesties actually could end up costing states.
"The biggest downside in our view is that an amnesty is unfair treatment of different taxpayers," says Robyn. "It creates a situation where law-abiding taxpayers who are paying taxes on time are paying for those who aren't."
And fully or partially waiving the penalties that are usually associated with noncompliance could cause some people to use amnesties as an unconventional tax strategy.
"Knowing that the state will hold a tax amnesty every three or four years, taxpayers could decide to hold onto their money to invest it or spend it and then take advantage of the next time the state offers amnesty," says Robyn.