Tax amnesty program hits halfway total

This story was updated June 8.

The whole tax amnesty idea came about last fall, when the Legislature was tearing back seat cushions to find dimes and nickels for Gov. Jennifer Granholms final budget.

The Republican-led House had suggested the idea back in 2006. At the time, it was yet another duct-tape-and-bailing-wire budget patch job. The thought was that if the Department of Treasury waived penalties for 60 days for anyone who owed a significant amount of back taxes, the state could raise about $25 million.

Senate Majority Leader Mike Bishop brought back the idea in 2009 and baked it into a revenue-generation package. The tax amnesty piece was designed to raise $35 million this time.

On both attempts, the Department of Treasury shot down both ideas, arguing a) the state wouldnt bring in enough money to be worth anyones while and b) the state doesnt want to offer too many tax amnesty programs out of concern that the public will get overly used to having them around.

So when the Granholm-led Treasury advanced the idea in 2010 as a way to bring in $88 million for the state coffers, a lot of Republican lawmakers were rolling their eyes and snickering into their handkerchiefs. 

Treasurys new estimates were based on an aggressive, $1.5 million publicity campaign and — by all appearances — the approximate size of the budget hole that needed filling.

Now, roughly halfway through the 45-day amnesty period, the Department of Treasury is reporting 12,000 applications, less than the 13,854 valid applications received during the 2002 program, which brought in some $31.7 million, according to a 2003 report on the program.

The number is still less than half of the 47,175 applications received in the 1986 amnesty program that brought in $73.2 million, but Department of Treasury Spokesman Caleb Buhs said officials are staying optimistic and are continuing with their extensive media blitz.

Television ads are joining radio spots, billboards, newspaper and web ads as the department gets the word out that "All Excuses Are Welcome" until June 30. Taxpayers with outstanding debts to the state can "settle up without paying any penalties." Interest fees still apply, however.

"Weve hit about every medium there is," Buhs said.

Michigan is not taking the carrot-and-stick approach other states have taken. In Pennsylvania, those with grossly overdue state taxes were promised that an army of auditors would be dispatched to settle up anybody in arrears who didnt participate in its amnesty plan.

That state also took an Orwellian "We-know-where-you" approach to scare people into paying up, Buhs said. The approach worked, though. The Federation of Tax Administrators have Pennsylvania picking up $261 million in its Spring 2010 program.

In 1986, the Michigan Department of Treasury used the mildly threatening slogan, "Get to Us Before We Get to You" campaign. It went over radio, television and print advertising and a stepped-up enforcement detail was launched after the amnesty period, as well.

Michigan isnt going that route in 2011. The idea this time is to simply invite people to participate no matter what excuse is cooked up. The 30-second TV ad now running statewide features three people who each claim they couldnt file their taxes because "I had a fever of 180," "a giant caterpillar ate it" and "I couldnt find any pens."

Its catching on. Treasury is collecting 150 calls a day for information.

Some 200,000 people the Department of Treasury has on record as owing money were sent letters alerting them of the non-penalty period, Buhs said. The publicity effort is significantly more extensive than the 2002 program, which had an advertising budget of only $100,000 or so.

The most successful tax amnesty program ever, according to the Federation of Tax Administrators, was the $582.7 million collected by the state of New York between Nov. 18, 2002, and Jan. 31, 2003. Louisiana managed to collect $303.7 million in the fall of 2009, Indiana $255 million the fall of 2005 and Illinois $314 million between Oct. 1, 2010, and Nov. 8, 2010.

Forty-seven states have done some sort of tax amnesty program since 1982, and several have done it multiple times. New York has had five tax amnesty programs, for example.

The Department of Treasury has a web page up detailing how a taxpayer can escape criminal prosecution for overly late business, sales, income and property tax, among other taxes at www.mitaxamnesty.org. Those who fall into that category need to get their paperwork in the mail and postmarked by June 30 in order to be eligible.

With the states economy back on the upswing, it may be a long time before the Legislature agrees to let Treasury try this again. 

It may be a much longer time before theyre this nice about it.

(Kyle Melinn is the editor of the MIRS Newsletter. He can be reached at melinn@lansingcitypulse.com.)