Baton Rouge, LA — Forgiving old debts is a nice thing to do. But for Louisiana, it is also a key piece of the state budget.
The state's tax amnesty period began Monday and runs through November 22. Anyone to agrees to pay their back taxes will have all the associated penalties waived, and the state will waive half the interest owed.
"We're sending out notices to 443,000 taxpayers in Louisiana covering about $1.4 billion worth of taxes that are delinquent," Tim Barfield, Louisiana's Secretary of Revenue, told NBC33 on Monday.
Louisiana is banking on recovering a small fraction of that, about $200 million. When the state legislature passed the amnesty bill in the 2013 session, they factored in that much money for the next year's budget. Barfield said forgoing the additional interest and penalties is a good trade if the state has cash to spend.
"From a collections standpoint, it's always better to get the money sooner rather than later," he mentioned, "because debtors have many choices on where they use their money, obviously."
Louisiana has held similar amnesty periods twice before, most recently in 2009. More than 40,000 people participated, generating $482.7 million. State economists worry that having another so soon afterward will make it tough to hit that $200 million target.
But the recession was just taking effect at that point, and Barfield believes it kept a lot of people from being able to pay their taxes on time since then.
"There's been some people had a lot of changes," Barfield noted, "so we're hopeful that there's good reason to believe they're going to take advantage of tax amnesty."
If the program yields less than $200 million, expect cuts to health care programs to balance the state budget. In a report dated June 7, the Legislative Fiscal Office predicted a tally in the $150-175 million range, but said the impact of the plan was "highly uncertain."
"There's a lot of money out there," Barfield argued. "And based on prior history, and based on what we think will happen, we feel good about that $200 million."
Skeptics also worry taxpayers will stop paying their taxes on time, if they feel amnesty periods will come every few years. But Barfield argued that giving taxpayers a chance at a clean slate can alter their behavior for the better.
"It helps taxpayers become compliant," he stated, "and hopefully remain compliant going forward."
This is the first of three amnesty periods prescribed by the legislature. The others will last for one month in each of 2014 and 2015, but the terms will be much less generous. In 2014, the state will waive 15 percent of the penalty and none of the interest; in 2015 that drops to 10 percent of the penalty and none of the interest.
"So if you're a taxpayers that is behind and wants to take advantage of amnesty, this is really the year to do it," Barfield said. "Beyond that, there's nothing on the books. There's no legislation and no plans for legislation."
Barfield predicted that people who will take advantage of the other two amnesty periods are those who are currently contesting their tax liabilities, who decide that paying through the amnesty program will be cheaper than waiting for a court's ruling.
People who choose not to participate in the current amnesty program may be surprised next year to find their federal or state tax refunds withheld. Barfield said his department has better tools now to discover tax cheats.
"We've done a better job assessing taxpayers; things like our federal-state match, that looks at differences between information on your federal return and what you reported on your state return," he said.
To apply for the state's tax amnesty program, click here.
For more details about who qualifies and how to pay, click here.