Illinois Tax Amnesty. Will it Work?

by Ashley Muchow A five-week tax amnesty period for those behind on their taxes this year began the 1st of this month. SB377, signed into law this summer, allows those who have accumulated back taxes between June 30, 2002 and July 1, 2009, to pay without penalty from October 1st to November 8th. Those tax...

by Ashley Muchow

A five-week tax amnesty period for those behind on their taxes this year began the 1st of this month.

SB377, signed into law this summer, allows those who have accumulated back taxes between June 30, 2002 and July 1, 2009, to pay without penalty from October 1st to November 8th. Those tax delinquents who don’t pay during the amnesty period will see interest and penalties double.

According to Christine Radogno’s Captiol Connection post:

The law was introduced to provide an incentive for tax delinquents to cough up their overdue obligations and bring in much-needed tax revenue. Legislators hope the amnesty incentive will save state officials time and energy they would otherwise spend pursuing the tax delinquents.

The tax amnesty program was initially projected to return about $350 million, a prediction based on the state’s 2003 tax amnesty program.

The Tax Foundation, a D.C. based think tank believes tax amnesty is bad policy.

We have long criticized tax amnesties as shortsighted and counterproductive. Amnesties provide a one-time injection of cash at the expense of undermining taxpayer respect for the law, rewarding dishonesty, and likely encouraging future non-compliance and ensuring the need for future tax amnesties.

While officials advertise amnesties as one-time deals, this is often not the case.

This is not Illinois’s first tax amnesty program–taxpayers were provided a similar option to pay up or pay more in 2003. Reoccurring tax amnesty programs are bad policy. Consider the incentives. Why would you or I make timely payments on our dues if we could predict a future exclusion of interest and additional fees?

But tax amnesty programs are certainly preferred to tax hikes. Those required by law to pay up should do so. Quinn’s tax amnesty program feeds off of this sentiment. Let’s hope any success that comes from the amnesty period will turn Quinn’s favored tax hikes into a distant memory.

Unlikely. But one can hope.

Note: The current tax amnesty revenue accumulation is behind predictions. The Illinois Department of Revenue hasn’t offered any predictions. Christine Rodogno’s Capitol Connection cites the Commission on Government Forecasting and Accountability’s indications that the program may return less than half the forecasted $350 million. Stay tuned.