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Tax Amnesty and the State Budget

Louis Grumet

“In this world nothing is certain but death and taxes.”

That, of course, is the great quote from Benjamin Franklin, uttered centuries ago and oft repeated since. It immediately came to mind as the NYSSCPA prepares to throw its support behind an important New York State bill that would publicly release the names of all delinquent taxpayers and allow them to repay their debt as part of a tax amnesty program.

It also brought to mind another quote, even older than Ben's, which is as appropriate now as it was more than 2,000 years ago: “Where there is an income tax, the just man will pay more and the unjust less on the same amount of income.”—Plato

Paying taxes is something we have to do. Millions of us in New York State pay taxes every year, but there are some who flout the system. In fact, there were more than 400,000 who didn't pay last year.

And as the great philosopher correctly surmised, when people don't pay their taxes, it creates a domino effect. Just look at New York's budget shortfall this year and how the cutting of programs and the slashing of jobs affects us all.

New York State is behind the times—19 other states already publish delinquency lists, and many others offer tax amnesty programs.

To combat this, New York State Senator Jeff Klein (D-Bronx/Westchester) and State Assemblyman William Colton (D-Brooklyn) have introduced a bill (S.4386/A.7381) that would make public the names of New York's top 250 tax delinquent businesses and individuals on a new state website. Under the bill, individuals and businesses that have a tax delinquency judgment ruled against them would be notified by certified mail that their names qualify to be placed on the website.

Tax delinquents would then have 60 days to respond to the Department of Taxation and Finance (DTF) before their names are published. Those who provide evidence that they have paid their debt in full, have worked out a payment plan, have declared bankruptcy, or owe less than $5,000 would be exempt from having their names published.

The amnesty program in the bill would allow individuals who haven't paid their taxes to avoid the sometimes massive fines and penalties associated with paying back taxes, while ensuring that the state receives its fair share of taxes owed.

If publicizing the names of the “unjust” sounds draconian, it isn't. Just as with the recently passed accountancy reform law, New York State is behind the times—19 other states already publish delinquency lists, and many others offer tax amnesty programs. It works.

In several other states where tax amnesty programs are in place, Asset Performance Group (a division of Sallie Mae) found that more than 10% of the debt had been collected. In New York State, as of April 30, 2009, there were 439,279 taxpayers who had a combined $2.5 billion in outstanding tax liabilities. Even a 10% return would mean $250 million back into the state's coffers, and that's a conservative estimate. The last time New York State had a general tax amnesty program—in 2002—it resulted in more than $525 million collected from delinquent taxpayers, according to a March 2004 report prepared by the DTF.

The obligation we have to pay taxes is the price we pay to ensure the continuation of a free and democratic society. It is part of the foundation this country was built on. It is a legacy we inherited, and now it is the trade-off we make daily for the public services and programs on which we depend.

Benjamin Franklin knew that more than two centuries ago. Plato knew it more than two millennia ago.

But in 2009, if it takes the threat of potential public shame to guarantee that all pay their fair share—with the judicious offer of amnesty for those who mend their ways—so be it.

Louis Grumet. Publisher. The CPA Journal, Executive Director, NYSSCPA, lgrumet@nysscpa.org.

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