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Analysis: Tax Amnesty Eyed As Part Of $1.4 Billion Budget Solution

  • Shifting some of the one-shots or diversions of dedicated funds used to balance the budget in FY15 to FY14 if the money is already available, and increasing the FY15 diversions from dedicated funds with remaining balances, such as the Clean Energy Fund, which was mostly spared in Christie’s original budget.

While pushing pension or state aid payments into the following fiscal year or shifting one-shots or diversions of dedicated funds from FY15 to FY14 would solve the immediate FY14 problem, the tax amnesty option is the only proposal -- other than a tax increase, which Christie would oppose -- that would actually add a major infusion of revenue for the FY15 budget.

That doesn’t mean it would be an easier option for Christie and Republican legislative leaders to swallow.

Nineteen Republican legislators, including current Senate Minority Tom Kean (R-Union), voted against the Corzine tax amnesty, and Christie, then the GOP nominee for governor against Corzine, not only opposed the bill, but criticized it as symptomatic of Corzine’s fiscal mismanagement. “It is now clear that Jon Corzine has no control over the budget or our government,” Christie told The New York Times. “He promised four years ago to change the way Trenton budgeted, but this budget uses billions in one-shot gimmicks -- including this latest tax amnesty windfall -- that will have to be made up in future budgets. This kind of haphazard governing by chance just doesn’t cut it when we’re facing 8.8 percent unemployment, skyrocketing property taxes and, real pain for all middle-class New Jerseyans."

Now, of course, Christie is defending his own reliance on one-shot budget maneuvers, including a retroactive $93.7 million cut in the state’s pension payments and a tobacco bond restructuring that traded $400 million in future revenues for a $92 million upfront cash payment that were part of the solution to a $694 million hole in the FY14 budget that was patched in March.

Christie, as a former U.S. Attorney, also has criticized repeated reliance on tax amnesties as a bad practice that encourages tax evaders to wait for the next amnesty to pay up.

New Jersey has had four tax amnesties, collecting $87 million in 1987 under Republican Gov. Tom Kean; $244 million in 1996 under Republican Gov. Christine Todd Whitman; $277 million in 2002 under Democrat McGreevey; and $725 million under the Corzine initiative in 2009.

Nationally, as in New Jersey, tax amnesty has not been a partisan issue and presumably would not conflict with Christie’s 2016 presidential ambitions. Louisiana Republican Gov. Bobby Jindal, who is also frequently mentioned as a potential contender for the GOP presidential nomination in 2016, is relying on $295 million collected in a tax amnesty last fall and another $100 million expected from a followup tax amnesty next fall to bolster his FY15 budget, with the tax amnesty money helping to pay for the first increase in higher-education funding since he took office.

Significantly, Louisiana, like New Jersey, ran a tax amnesty program in 2009, so its combined 2013 and 2014 amnesty revenue surge would cover the same five years of delinquent taxes as a New Jersey program implemented this fall.

Kentucky, Republican presidential frontrunner U.S. Sen. Rand Paul’s home state, and Texas under Gov. Rick Perry, ran tax amnesty programs in 2012. GOP Gov. Rick Snyder ran an amnesty in Michigan in 2011, and the GOP bastions of Alabama and Arizona joined New Jersey, Louisiana, and eight other states in using amnesties to close deficits in 2009. Mississippi and Nebraska, both GOP strongholds, are currently considering amnesty programs, as is Democratic Massachusetts.

Connecticut, under Democratic Gov. Daniel P. Malloy, who has sparred publicly with Christie over issues of tax policy, is coming off a two-month tax amnesty that ran from September 16 to November 15 and collected $180 million. The broad-based amnesty offered individuals and businesses the opportunity to apply for a 75 percent interest reduction and waived all penalties.

“It is important that all Connecticut taxpayers pay their fair share, and the amnesty program allowed delinquent taxpayers to come forward in record numbers to do the right thing,” Connecticut Revenue Services Commissioner Kevin B. Sullivan said in announcing the results. “Amnesty programs return more to the state on behalf of all taxpayers than would likely be realized through the expense of usual collection efforts. We can now focus enforcement on those who have failed to come forward.”

California’s $4.3 billion tax amnesty windfall in 2005 remains the record, but Pennsylvania under Democratic Gov. Ed Rendell pulled in $261 million in 2010 with an aggressive TV and radio campaign, call centers, and other best practices patterned after the 2009 Corzine initiative.

Rousseau said it takes time to properly market a tax amnesty program, and it isn’t just the creation of a TV and radio advertising campaign, but sending out mailings to companies.

“There’s absolutely no way you could do it this year,” Rousseau said. “If you wanted to do it, you would need to be ready to go in September, market it through October, and set up a window for people to pay October 15 to December 15, for example.”

With that timetable, he said, the Treasury Department would know whether it met its tax amnesty revenue target midway through the budget year, and would have time to make any midyear budget adjustments needed if revenues fell short or to include any surplus in developing its budget for FY16.

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