June 24, 2018
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State tax amnesty programs proposed

By Mal Leary, Maine Public

AUGUSTA, Maine — Gov. John Baldacci is proposing a pair of new tax amnesty proposals in his budget plan just weeks after the successful conclusion of a program that waived 90 percent of the penalties on overdue taxes.

But some lawmakers and others argue another tax amnesty so soon after that program may not be as successful.

“It may be necessary, but this is not good tax policy that we would want to do year in and year out,” said Sen. Joe Perry, D-Bangor, co-chairman of the Legislature’s Taxation Committee. “I don’t like this two-part program. If we are going to do another one, we should do the same for all the [tax] receivables out there.”

Maine Revenue Services estimates that $257 million in taxes, penalties and interest is owed the state based on actual tax assessments. The proposal would waive 95 percent of the penalties on unpaid tax liabilities from July 1, 2005, until Dec. 31, 2009.

For those with tax bills assessed before June 30, 2005, they would have 95 percent of penalties and 95 percent of interest waived for paying their back taxes in the proposed window.

That window would be Sept. 1, 2010, to Nov. 30, 2010, for both parts of the program.

“I am one of those that bought into the arguments of the department that you don’t want to do these very often,” said Sen. Richard Nass, R-Acton, the GOP senator on the Taxation Committee. “But I guess you can’t argue with success, and if this brings in some past-due revenue, that will help with the budget.”

Nass has served on the Appropriations Committee and said that panel will be looking for every dollar it can find to bring the budget into balance. He said that while the Taxation Committee may try to make some changes in the program, he expects some sort of tax amnesty will be included in the budget because of the scope of the budget deficit.

The proposed budget totals $438 million in cuts and spending shifts.

“We are in a crisis,” Nass said, “and we will do things we would not do in other times.”

The Tax Receivables Reduction Initiative, the state’s limited tax amnesty program that ended Nov. 30, brought in $16.2 million, well above the $9 million that was estimated for the plan. It waived 90 percent of the penalties owed and 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.

“My initial reaction is that if they didn’t take advantage of the amnesty the first time, they are not going to take advantage of it now,” said Rich Ganong, president of the Maine Chapter of the National Association of Tax Professionals. “The problem is people just don’t have the money to pay; if they did, they would take advantage of another one.”

He said the concern mentioned by lawmakers that some taxpayers may wait for a better tax amnesty program in the future is not something he has seen in his tax practice. He said taxpayers who owe taxes but can’t pay the bill are urged to file anyway so they avoid the stiff penalties of not filing a tax return. He agreed with Perry that an across-the-board program likely would be more successful than the pending proposal.

“If they did it across the board, they would probably have a better chance of collecting money,” Ganong said. “I honestly think those with an income tax obligation have taken care of it in this last amnesty.”

Finance Commissioner Ryan Low said all of those concerns were considered in fashioning the budget proposal. He pointed out that more than $7 million came from corporate taxpayers and about $5 million from individual income taxpayers. The rest came from the wide variety of taxes, like the sales tax, that Maine Revenue Service is responsible for collecting.

“We are only projecting this will bring in $9.5 million,” Low said. “We certainly hope it will be more, but we are being conservative in the estimate.”

Low said Maine Revenue Service carefully reviewed the potential and believes it can collect that amount of cash. Some of the total estimate is based on the belief the amnesty will speed up collections that would have come in over the next two years anyway, and they have lowered revenue estimates by $3.8 million for the budget years of 2012 and 2013.

“I think one of the surprises we found in the first tax receivable initiative was that we had a lot of folks come forward that owed a lot of the older debt,” he said.

Low said about 75,000 taxpayers who owe back taxes could take advantage of the new proposal.

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