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'To Forgive Is Divine' -- And Profitable Too

Massachusetts Tax Amnesty Program Nets $60 Million, Spurs National Attention

By George A. Whiteside

As midnight approached on January 17 this year, thousands of Massachusetts citizens jammed 12 temporary tax centers from Boston to Pittsfield to settle accounts with their consciences and with a vigorous new state revenue department bent on curing what Revenue Commissioner Ira A. Jackson '70 describes as "bad tax habits" in the commonwealth.

That was the scene on the last day of Massachusetts' tax amnesty program, a 14-week, one-time offer allowing tax evaders to pay up their back taxes without any legal penalties.

More than 130,000 people took advantage of the offer and the tardy payments ranged from eight cents from a senior citizen to $1.9 million from a "Fortune 500" company. With only a thousand of the last-minute filers' applications for amnesty still left to process, the receipts from the amnesty are expected to reach $60 million in previously uncollected tax revenue.

The Massachusetts amnesty was only the fifth such program tried in the United States, and it netted 10 times the total from the most successful previous program--conducted by Arizona revenue officials.

Due to its unprecedented success, the amnesty has begun to draw nationwide attention from other state tax agencies--as well as from the U.S. House of Representatives Ways and Means Committee.

And Massachusetts officials are hinting that the amnesty, together with the state's recent tax enforcement crackdown, may become a model for similar programs that are beginning to spring up across the country. Forty-two states have inquired about the amnesty's success, says Edgar A. McHale, assistant director of communications at the revenue department. He added that revenue officials have also been contacted by representatives of the House Ways and Means Committee, the City of New York, and even the Canadian Parliament.

The total intake for the Massachusetts amnesty currently stands at $58.14 million, according to Harry Durning, revenue department communications director, and will easily surpass $60 million once the remaining 1000 amnesty applications are processed. "The wildest optimists thought we'd make $20 million," Durning says, adding that even Jackson himself, who championed the idea, only projected a $5 million intake.

But Jackson and his crew say they will not be spending much time resting on their laurels. The state's amnesty program was part of a package deal which included strict new tax enforcement legislation--a single, 101-article bill called the Revenue Enforcement and Protection Act (REAP).

"We're going to be going out like gangbusters with even more vigorous enforcement," says Jackson, adding that as commissioner of revenue he is sanctioned by REAP to employ tax collection techniques "unprecedented in the nation."

"REAP gave the [revenue] department some important new powers," Durning explains, including the following; the power to suspend private state-issued licenses of individuals who fail to pay taxes; the right to demand that harbor masters in Massachusetts submit yearly lists of locally moored boats and yachts; and the freedom to employ private bill collectors in collecting state taxes. And, During says, the department is also making "more intelligent use" of the powers it held previously.

Jackson says that aside from a series of initiatives "we have up our sleeve" which he declines to divulge, the department's next focus will be on building up its resources--with computers, better training for personnel and a greater auditing capability.

When he arrived in office 13 months ago, Jackson says, the state employed only 26 corporate tax auditors--while Massachusetts has 125,000 registered corporations. "We had more auditors to detect welfare fraud than corporate tax evasion--which is a more lucrative area," Jackson notes.

Telltale Cars

Johnson stresses that the revenue department is striving to restore its credibility and "deterrent effect," as well as to try out new enforcement initiatives.

One of REAP's main provisions changed the status of tax evasion from a misdemeanor to a felony, which now carries a jail sentence of up to five years and fines of $100,000 for those convicted under the new laws.

But the main result of REAP is that Massachusetts residents will now face a better coordinated tax collection bureaucracy that can pursue enforcement initiatives more freely than before.

For example, "Luxcar," the revenue department's latest initiative, tracked down 46 tax evaders who each owed the state more than $10,000 by running lists of state-registered Rolls-Royce and Mercedes owners through a specially designed computer program.

Although Massachusetts officials call the amnesty a "once in a lifetime offer," they stress that its benefits to the state are much more than short-term. "The real beauty of this is that all of the non-filers are now filers--this wasn't just a one-time windfall," says McHale. "We can count on this additional revenue from now on."

The key here is that non-filers who came forward during amnesty--whether tax evaders, who avoid paying taxes, or tax delinquents, who build up tax debts even though the state knows their identity--are now permanently on the state's rollbook. The amnesty is also valuable to the state as a barometer of its enforcement techniques, says Jackson. "We got a unique insight into the world of tax evaders and delinquents," he explains.

Uncle Sam Too?

Gregory Z. Smith, a public information officer for the Arizona Department of Revenue and the originator of the amnesty idea, cor, tends that tax amnesty can also work at the federal level, especially if federal tax enforcement is increased.

One of the main proponents of a federal tax amnesty on Capitol Hill now is Speaker of the House Thomas P. "Tip" O'Neill (D-Mass.). But because the Internal Revenue Department and the Treasury oppose the amnesty in principle, and because the idea is so new, it is "too early to tell" whether it will catch on in Washington, says a policy analyst for the tax staff of the House Ways and Means Committee who declined to be identified.

"We're being pushed to look at [amnesty] more than we ever have," the tax analyst says. Although the analyst voices doubts about the ease with which an amnesty program could be implemented at the federal level, she adds that the success of Massachusetts's program has spurred important Washington officials to examine amnesty.

If the new plan can gain support from Congrees, she indicates a national amnesty program would be established within five years.

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