Pa. will offer tax amnesty

HARRISBURG - If you owe back state taxes, now isn't the time to get right with the Revenue Department.

Pennsylvania plans to launch a tax-amnesty program on April 26, so letting your tax debt go unpaid for a few more weeks could save you serious money.

During the 54-day amnesty period, all penalties and half the interest will be waived for businesses and people who pay off delinquent taxes accrued through June 2009.

For the cash-hungry state treasury, the benefit is a projected spike in tax collections expected to generate an additional $190 million to help offset spending in the fiscal year that began July 1.

The amnesty program grew out of the political stalemate that held up passage of the state budget for 101 days, although it was overshadowed in news coverage by debates over increasing taxes and legalizing table games at casinos.

The biggest impetus was last year's hugely successful amnesty program in New Jersey, which raked in a record $725 million in six weeks.

"They hit the mother lode in Jersey," said Senate President Joe Scarnati's lawyer and spokesman, Drew Crompton, who helped write the amnesty legislation.

Pennsylvania's last amnesty program, in 1995-96, waived penalties but required full payment of taxes and interest. This year's no-penalty, half-interest offer, based on New Jersey's program, is designed to entice more delinquents to pay up.

"It's a better deal than the last time," Revenue Department spokeswoman Stephanie Weyant said.

But delinquents will still pay more than they would have had they paid on time, Crompton added.

Another provision provides an extra incentive for taxpayers previously unknown to state officials to come forward in the amnesty program. Those taxpayers will not be held responsible for taxes due before July 2004. In exchange, they will have to supply the department with the information it needs to tax them in the future.

"You get them on the [tax] rolls, you find out where they are," Crompton said.

Tax delinquency is a chronic headache for state government, which collected about $700 million in overdue taxes, penalties, and interest in 2008-09 and $900 million the year before that. Vigilant enforcement is crucial, not only to maximize revenue but also to promote respect for tax laws.

Critics say such amnesties can undermine tax-law compliance if used too often.

"It encourages cheating, basically," said staff economist Mark Robyn of the Tax Foundation in Washington, a nonpartisan tax-research group. "It leads you down the road of having to do more amnesties in the future."

Fourteen years have passed since Pennsylvania's last amnesty program, much longer than many other states have waited.

And the program contains sticks as well as carrots.

For example, participants who fall into delinquency again within two years may be required to pay the full penalties and interest that had been waived.

Also, once the amnesty period ends, a special, "nonparticipation penalty" of 5 percent will be levied against delinquent taxes, penalties, and interest not paid in full.

And all of this year's participants will be barred from any future amnesty programs.