Senator Lloyd Smucker

Floor Remarks - Tax Amnesty Makes Fiscal Sense

As our daily debates are demonstrating, there are deep differences of opinion over the advantages of cutting spending as opposed to raising taxes. But there is one hard, cold, brutal fact in this budget debate – the record $3.25 billion deficit – warranting extraordinary steps.

My view is that we are obliged to take cost-cutting and program deletion as far as we can reasonably and responsibly go. This is consistent with the preference being forcefully expressed by taxpayers. Then we must find revenue to plug the remaining gap, without increasing state taxes. People expect us to poke under every rock of state government to find revenue or savings.

In this vein, I believe it is time to take a new look at an old option – tax amnesty.

This is not complicated. Open a three-month window, forgo penalties, waive half the interest charges, and see what comes in. If we get 10% of the $1.6 billion the Revenue Department considers collectible, that is a sizable building block for a new budget.

Pennsylvanians have many good reasons for objecting to a major state tax increase. Certainly one is the huge pile of delinquent taxes sitting there. It has not escaped notice that the delinquent taxes considered collectible equal the take from one year of Governor Rendell’s proposed PIT increase.

That state government has been more aggressive in chasing down tax cheats is indisputable. That there is still a lot of money owed is also indisputable. If we can pull in more of that money more quickly, so much the better.

We can take care of the concern that this might somehow encourage tax evasion. Given that there would be a fourteen-year gap between the last one and this one, it is doubtful anyone is going to fashion a tax strategy of waiting for the next one. We stick in a reinstatement of penalties and interest for future noncompliance by those who take advantage of amnesty.

Governor Rendell has gone out of his way to disparage tax amnesty. He reacted as if someone handed him a bag of angry rattlers and told him to try snake-handling. It is hard to see why. Even editorial writers who agree most of the time with the Governor seem baffled by his adamant opposition to amnesty. This week, the Philadelphia Inquirer and the Harrisburg Patriot weighed in for a tax amnesty program.

Other states are doing it, and do not seem worse off for the effort. New Jersey was figuring on $200 million, and ended up realizing more than three times that, exceeding $700 million. There is even a suggestion that the federal government do an amnesty program as a part of the rumored Stimulus II.

There is no real risk to it, there is not a whole lot of cost to it, and the potential upside in capturing revenue we desperately need argues strongly we should pursue it.