Tax amnesty brings in more than expected

Posted Dec. 07, 2009, at 9:25 p.m.

AUGUSTA, Maine — The state limited tax amnesty program that ended Nov. 30 has brought in $16.2 million, well above the $9 million that was estimated for the plan to help balance the state budget.

“Yes, I am surprised. If I had thought it would bring in $16 million, we would have booked that in the budget last June,” Finance Commissioner Ryan Low said Monday. “Pleasantly surprised for one of the few times since I took this job 15 months ago.”

He said more than $7 million came from corporate taxpayers and about $5 million from individual income tax payers. He said the total also included sales taxes that were owed and other taxes that the Maine Revenue Service is responsible for collecting.

This program, the Tax Receivables Reduction Initiative, waived 90 percent of the penalties owed and required all of the tax and interest that was owed to be paid before the end of the program. The plan was aimed at the growing amount of uncollected taxes during this recession, which is making it difficult for businesses and individuals to pay what they owe on time.

Low said with the success of this effort, the administration is looking at what efforts they can include in the supplemental budget to help close the $383 million revenue gap. He said the supplemental budget will be released Dec. 18.

“What parts of this worked well, and how can we replicate those?” he said. “Were there certain things in this one that if we maybe tweaked a little bit we could get more interest in it? Those are the sort of things we are looking at.”

Low said he expects the supplemental budget will include attempts to reduce the size of the tax receivables, which was $256 million as of Nov. 30. Jerome Gerard, acting executive director of Maine Revenue Services, said receivables appear to have peaked at $276 million in September.

“We know there is much more out there,” said Sen. Bill Diamond, D-Windham, co-chairman of the Appropriations Committee. “What we have to decide is how far can we go with this.”

He said while most Mainers pay their taxes on time, there are a significant number that do not. The total number of taxpayers on the list owing the state back taxes was 70,000 earlier this year.

“We have to be careful how we do this,” Diamond said. “But we have a crisis in front of us and we need to find $383 million and this is one way, having people pay the taxes they owe, to do it.”

Sen. Richard Rosen, R-Bucksport, the GOP senator on the Appropriations Committee, said he was “pleasantly” surprised that the tax amnesty program brought in more than projected, and agreed with Diamond that another initiative to collect overdue taxes likely will be part of solving the state’s budget shortfall.

“The record seems to show here that relieving people of the penalty will encourage taxpayers to come forward and settle what they owe the state,” he said.

Sen. Joe Perry, D-Bangor, co-chairman of the Legislature’s Taxation Committee, said while he is pleased the program brought in more than expected, he is not happy with the consideration of another tax amnesty program. He said the last program was a creation of Maine Revenue Services and the Appropriations Committee, with little tax committee input.

“I assume they will want to go forward with another tax amnesty of some sort,” he said. “And that just raises a whole host of questions.”

Perry said when Maine Revenue Services has testified before the tax committee in past years it has stressed that overuse of tax amnesty programs discourages compliance with tax laws. He said a business owner having trouble paying taxes in this recession may want to delay paying what is owed hoping the penalties or interest, or both, may get waived in the future.

“I think what we really have to do, as the tax committee, is to re-examine the whole way that we collect taxes and see if there are better ways to do it,” he said. “I think we need to spend the time to do that.”

Perry said he believes Maine Revenue Services is too aggressive in some of its collection methods and not as flexible as it could be to help taxpayers pay what they owe without being forced to close their business because payments drained all of their cash.

He said a more “common sense” approach could keep some businesses open and generating several types of tax revenues for the state instead of just getting an overdue payment at the expense of having a business close its doors.

The last tax amnesty, in 2003, brought in $37.6 million, well above the $19 million estimate. A similar amnesty in 1990 yielded $29.6 million.

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