State tax amnesty fizzles

$12.96 million is well short of $70 million goal

November 02, 2001|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

An expected spike in tax amnesty collections in the weeks before the Oct. 31 deadline did not materialize, and the state has received only $12.96 million in penalty-free back taxes so far - well below the $70 million figure that legislative analysts had predicted.

The results are the latest budgetary woe for Maryland after legislative policy analysts cautioned this week that the state could face a $1.7 billion shortfall by the end of next year.

The state comptroller's office won't have final collection figures for several more days, but state officials said that the events of Sept. 11, a weakening economy and low consumer confidence were factors in keeping people from coming forward and paying their taxes.

Before the two-month amnesty period began Sept. 1, Comptroller William Donald Schaefer warned that the $70 million figure was too high. His spokesman, Michael D. Golden, said yesterday that Schaefer was expecting around $35 million a few days ago.

"The economy taking a downturn may have made people more reluctant to part with their cash," said Golden. "We need to take a good look at these numbers once they're all in and figure out what happened. You can't say it's from a lack of publicity."

The legislature earmarked $1 million from the collection effort to cover a public relations campaign that included television, radio, print and billboard advertisements throughout the state, which mostly featured two men dressed in black and the catch phrase: "Seek Amnesty."

Another $1 million went for the comptroller's office to hire 20 additional employees for collection and enforcement efforts.

But how much money the state will ultimately keep remains unclear. As part of the amnesty program, the state also collected back taxes owed to the counties and Baltimore, Golden said. He said that about one-third of what is collected will likely go to local jurisdictions, but the comptroller's office doesn't have firm figures yet.

After that disbursement, any state-owed taxes collected - up to $30 million according to the tax amnesty legislation - will replenish the state's reserve fund. After a request by the legislature, Gov. Parris N. Glendening dipped into the reserve fund this year to cover accumulated deficits in community mental health programs, but only on the condition that a tax amnesty program was passed to bring in more revenue.

"We were hoping to replace that money in the reserves," said Michael E. Morrill, the governor's spokesman. Other items included in the legislature's tax amnesty bill passed in April included public education grants to counties and Baltimore, and money for volunteer firefighters. But chances for their funding appear slim.

"They were wish-list items; they were not planned expenditures," Morrill said.

Warren G. Deschenaux, director of the legislature's office of policy analysis, which calculated the $70 million projection during the last legislative session, said it was based on the performance of Maryland's last tax amnesty period in 1987 and a more favorable economic picture. That amnesty period collected $36.6 million after spending $375,000 on advertising.

"Given world events, the potential of a liability on your taxes probably pales as a problem," Deschenaux said yesterday. "Between stock market losses and job insecurity, people just might not have the liquidity to meet those obligations."

The final collection figure from the amnesty period will likely go higher, but the comptroller's office isn't predicting how much. Spokesman Golden said there was a backlog of 1,000 pieces of mail as of yesterday, and more amnesty applications are expected to arrive postmarked by Oct. 31.

The majority of back taxes and interest collected through the amnesty program has come from 6,950 individual income tax filers for a total $7.77 million. The state is owed $260 million in back taxes, Golden said.

With amnesty over, the comptroller's office will pursue civil and criminal enforcement measures. Fines will increase from $5,000 to $10,000 per violation, and jail time of up to five years is possible.

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