Tax scofflaws in Maryland have two months to come forward and pay up without penalty through an amnesty program announced by Gov. Martin O'Malley on Monday.
The amnesty runs through Oct. 30 and allows some Maryland residents and small businesses to pay back taxes free of penalty and at half the interest accrued. The program is being implemented under a law approved by the General Assembly this year and signed by O'Malley, a Democrat.
About 177,000 individual and 18,000 business tax accounts are delinquent, adding up to as much as a half-billion dollars. The amnesty applies to income, sales, withholding and other taxes, and participants can negotiate payment plans that must be settled by the end of December 2010.
With budgets squeezed by the recession, several states have implemented tax amnesty programs, including Delaware, Louisiana, Maine and Oregon. Maryland's is expected to generate $5 million to $10 million for this fiscal year and next.
"We're facing an economy that we haven't seen since the Great Depression, and there are many families and small businesses that are struggling to make ends meet and pay their taxes," said Sen. James E. DeGrange, an Anne Arundel County Democrat and sponsor of the legislation. "This is going to be a tremendous help."
But not everyone is an unabashed fan of the amnesty program. Comptroller Peter Franchot is "lukewarm" on amnesty programs and would prefer boosting enforcement measures, such as an upgraded computer system he has championed to more effectively track delinquent taxes, spokesman Joseph Shapiro said.
Franchot was invited to appear at O'Malley's news conference on the topic in Dundalk but was on vacation. The comptroller "certainly understands Maryland is in the middle of an historic financial recession" and appreciates the amnesty program's goal of bringing more money into state coffers, Shapiro said.
Last week, the state Board of Public Works that includes O'Malley, Franchot and Treasurer Nancy K. Kopp approved $454 million in budget cuts to keep the state's spending plan in balance.
Maryland declared tax amnesties in 1987 and 2001 that raised $33.5 million and $39.5 million, respectively.
This year's amnesty is expected to raise less because individuals and businesses have less money in the middle of this recession to settle outstanding tax bills. And unlike the 2001 amnesty, the legislation doesn't increase future penalties associated with tax evasion, giving delinquent taxpayers incentive to come forward sooner rather than later.
"This is not a solution to Maryland's problems," Senate President Thomas V. Mike Miller said. "It's a partial answer."
Ronald Wineholt of the Maryland Chamber of Commerce said his organization would encourage businesses to take advantage of amnesty because "there will not be a better deal. This is the right time to show some compassion while at the same time collecting every penny that's due in taxes for the state," he said.
