Hard-Up States Hide Stick, Offer Carrot to Tax Dodgers ; Faced with Growing Budget Shortfalls, a Few States Are Introducing Tax Amnesties. Some Question Their Fairness

Article excerpt

On one recent morning, a staffer in an obscure office of the Ohio Department of Taxation received more than 100 frantic phone calls by 10:30.

Most of the callers had the same plea: I've got some money I want to give you. Please take it. Please take it today.

The calls were coming in on the last day of a special "amnesty" program offered by the state as a way to collect on overdue taxes.

Ohio was offering tax dodgers, both individuals and businesses, a "one-time" chance to pay their overdue levies - and avoid having to pay back interest, or face criminal penalties in the process. The result: The state took in some $24 million in one month.

From Michigan to Nevada, a number of states are resorting to amnesty programs in an effort to wring every last 50-cent piece out of delinquent taxpayers - and add much-needed revenue to state treasuries.

The low monetary cost of such programs makes them irresistible to some states (Ohio's total advertising and administrative budget for its amnesty program was only $500,000). Politically, amnesty is a much more palatable revenue quick fix than either raising taxes or cutting programs, although forgiving tax evasion can sometimes leave lawmakers open to the charge of being soft on "crime." Proponents, however, argue it's a win-win for taxpayers and revenue-hungry states who want to clear their consciences and their books, respectively.

"Most taxpayers who are delinquent are not dishonest people, more likely they didn't understand the law because it's complicated or they got themselves in some financial difficulties and therefore skipped a payment or whatever," says Thomas Zaino, Ohio's tax commissioner. "It gives those folks a chance to come forward and get this off their chests and sleep a little better at night."

In addition to Ohio, Maryland, and Louisiana offered such programs last fall and New Hampshire is in the middle of a 10-week amnesty effort. Arizona, too, will soon take its second trip down amnesty lane this year - it was the first to initiate such programs in 1982.

Those who question the effectiveness of the laws are especially irked by a recurring theme: These "once-in-a-lifetime programs" are being repeated every few years in some cases. While this was Ohio's first ever amnesty program - and, officials insist, its last - Louisiana recently concluded its fourth amnesty program in 16 years. …