The Tax Man Cometh

Naturally, it would be better if everybody simply paid their taxes as the law requires. But since this doesn’t happen, the state has decided to offer three months of tax amnesty to scofflaws in hopes of drumming up more state revenue. In an era of budget shortfalls and legislative arguments over spending $1 million here or there, any new money that can be found is helpful.

The Baldacci administration hopes that $14 million can be raised by encouraging people to pay what they owe, with reduced interest, by Nov. 30. If the state’s only other tax amnesty effort is any indication, this is a conservative estimate. In 1990, Gov. John McKernan offered amnesty for two months and $29 million was collected. The state is currently owed $199 in unpaid taxes, according to the Maine Revenue Services.

Maine is one of seven states that have launched amnesty programs since July 1 and nearly all states have tried such forgiveness programs in the last two decades. New York collected $520 million in a 21/2-month amnesty program that ended in January. New Hampshire collected $13.5 million in 21/2 months last year.

Critics of the program are right to point out that everyone should be made to pay taxes and that those who do not should be penalized. But it is clear that this is not the case and the state does not have the resources to pursue all the non-payers. Costs add up quickly when the state pursues those who do not pay taxes or file returns. It costs $6 just to send a certified letter demanding payment, $8 to register a lien and $17.90 must be sent to the U.S. Treasury for the state to take its delinquent tax payment out of someone’s federal income tax return.

Of course, it would be better if the state could collect the entire $199 million it is owed. But, given the fact that the state still faces a $4 million budget gap, any source of extra money is welcome. So, if you owe tax money, pay now. Otherwise, penalties run from a small interest payment to time in jail. Once the amnesty period ends Nov. 1, the state will increase its enforcement efforts. You can pay now or pay much more later.