This would be the third tax amnesty program the state would be run in less than two years, and the second under Baker.
BOSTON - Gov. Charlie Baker will propose raising an additional $100 million next year by granting amnesty to people who have not filed their taxes.
This is the third tax amnesty program the state would run in less than two years, and the second under Baker, although each program has generally applied to different groups of taxpayers.
"Creating incentives for businesses to follow through and pay what they owe will help generate much needed revenue as our administration fixes the budget problems we inherited and brings filers into the system for future payments," Baker said in a statement.
The tax amnesty program, which Baker, a Republican, announced Saturday, would run for all of fiscal year 2016 and would waive penalties for individuals and businesses who owe back taxes to the state because they have not filed a return. This includes people who are known to the Department of Revenue because they filed in one year but did not file in another year, but for whom the department has not yet gotten around to assessing the fines. It also includes people who have failed entirely to file their taxes and are unknown to the state.
Brendan Moss, a spokesman for the Secretary of Administration and Finance, said the goal would be to get people who never filed taxes into the system, which would also generate new revenue in future years. He estimated that 10,000 to 20,000 people would file their taxes under the proposal.
The last time the state ran a tax amnesty program for non-filers was in 2002, and the program brought in $176 million. That amnesty lasted for two months.
The state has run other tax amnesty programs.
In September and October 2014, former Gov. Deval Patrick, a Democrat, ran a tax amnesty program for people who owed personal income taxes and non-corporate business taxes like the meals and rooms tax. That raised $69.1 million. Baker ran another tax amnesty this February for corporate tax filers. The state is still tallying the revenue from that program.
Before that, the state last ran tax amnesty programs in 2009 and 2010. The 2009 program covered personal income and use taxes, and raised $32.2 million. The 2010 program covered sales, rooms and meals and other non-personal, non-corporate taxes. It raised $32.6 million.
Carolyn Ryan, a policy analyst for the Massachusetts Taxpayers Foundation, said tax amnesty programs tend to be used occasionally by state government. "Often, it's in situations like this where government's facing a large deficit and there's not necessarily an obvious way of closing that deficit, so people work for more creative solutions," Ryan said.
The Massachusetts Taxpayers Foundation has estimated that Baker will have to fill a $1.5 billion gap in 2016 between the revenues that are coming in and the amount of money needed to maintain current services.
Ryan warned that government cannot do tax amnesty programs with any regularity because people would then anticipate amnesty and would not file on time.
Ira Jackson, dean of the McCormack Graduate School of Policy and Global Studies at the University of Massachusetts Boston, was the commissioner of revenue under former Gov. Michael Dukakis, a Democrat. Jackson proposed the first successful tax amnesty program in the country in 1984. The Legislature estimated the amnesty would raise $5 million; it brought in $87 million.
Jackson said he proposed amnesty as a one-time event. "I anticipated a non-recurring opportunity for tax evaders and delinquents to come in, settle up and never look back," Jackson said. "It was a resounding success and was emulated by many states across the country."
Jackson, a Democrat, said his feeling is tax amnesty should be "few and far between," with an effective enforcement of tax evaders the rest of the time.
"Every once in awhile, if folks on the inside think a cleansing of the system is appropriate, it's certainty an efficient and effective way of bringing in a number of non-filers," Jackson said.
"If $100 million in non-filer income is out there, cha-ching," Jackson said. "That sure beats cutting back on service on the MBTA or furloughing state employees."
At a recent hearing on 2016 revenues, Department of Revenue Commissioner Amy Pitter said she has mixed feelings on tax amnesty. If programs happen too frequently, Pitter said some taxpayers will not pay their bills because they are waiting for the next amnesty. She said there are also concerns that tax amnesty programs accelerate but do not increase payments.
Pitter, through a spokeswoman, referred questions about Baker's proposal to Moss.
Baker will release his proposed 2016 budget on Wednesday, and it will then go to House and Senate budget writers.
The chairmen of the Joint Committee on Ways and Means, Sen. Karen Spilka, D-Ashland, and Rep. Brian Dempsey, D-Haverhill, could not be reached Monday.
Rep. Stephen Kulik, D-Worthington, vice chairman of the House Committee on Ways and Means, said he will consider the tax amnesty program as part of Baker's budget proposal, and he looks forward to hearing more details. "The issue with tax amnesty programs is you cannot do it very often because then you create an incentive for people not to remit their taxes on time, if they think there's going to be an amnesty program coming down on a fairly regular basis where they can avoid the penalties for late payment of taxes," Kulik said.
Kulik said the best tax amnesty programs are those that are "unexpected and infrequent" but give people incentives to pay back taxes.
"The fact that we've had two recently gives me some pause about the effectiveness of another one coming on the heels of those," Kulik said. But he said he will let Baker make the case for why it is a good idea.
Chris Geehern, a spokesman for the Associated Industries of Massachusetts, a business trade group, said as long as tax amnesty is implemented rarely, it can be effective. "Our view on this is if it's something the administration could do to both bring taxpayers into compliance and increase revenue to the commonwealth, it's a good thing," Geehern said. "We encourage companies to pay their taxes and certainly the state's looking for every piece of revenue they can."