NCPA - National Center for Policy Analysis

Tax Amnesties Filling Budget Gaps

January 8, 2004

State governments are collecting up to four times as much money as they expected from tax amnesty programs that waive fees and penalties for people who pay their back taxes, say tax experts.

Scrambling to fill budget gaps, 11 states, including Arizona, Colorado, Florida, Illinois, Kansas, Maine, Massachusetts, Missouri, New York, North Dakota and Virginia, offered tax amnesties in 2003. In nearly every case, the response generated revenue far exceeding projections:

  • In Illinois, revenue officials expected to collect between $130 million and $230 million, instead 81,000 taxpayers paid $522 million.
  • Arizona generated $73 million from 4,700 businesses and individuals when it waived penalties and offered lower interest rates to delinquent taxpayers; the state had expected to collect $25 million.
  • Massachusetts 60 day amnesty was so successful in fall 2002 that it repeated it in the first two months 2003; state tax officials collected $172 million for both amnesties - four times the $43 million initially predicted.
  • New York's amnesty plan has run the longest, from November 18, 2002 to January 31, 2004, and has generated $520 million.

Tax experts indicate that tax amnesty programs are a way of getting money in the door quickly, but they warn that offering amnesty too frequently may encourage tax evaders to ignore their tax bills and wait for the next amnesty.

Source: Larry Copeland, "Tax Amnesty Plans Exceed Expectations," USA Today, January 5, 2004.

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