Tax amnesty program will need "teeth" so as not to encourage delinquent filers, Rep. Farmer says

01/23/2012 05:23 AM

The governor’s proposal for a brief window of amnesty for Kentuckians who have failed to file their state taxes recently must include some provisions to make sure it doesn’t encourage once-a-decade filers, state Rep. Bill Farmer said.

Farmer, a Lexington Republican, runs a tax preparation service. And he said he had clients in past rounds of tax amnesty indicate that they might wait to pay their state taxes until the next amnesty period.

“I’m afraid people are going to think the state is going to do this on a regular basis … and skirt the law until it’s to their advantage,” Farmer said. Watch his comments to Pure Politics:

During his budget address, Beshear called for the first tax amnesty program in 10 years, which he said would inject $65 million in one-time revenue from delinquent taxpayers. Beshear is predicating part of his budget on that money.

The theory is that Kentucky is more likely to collect that money from delinquent filers with the amnesty.

Indeed, the last Kentucky amnesty program from Aug. 1, 2002, through Sept. 30, 2002, yielded the state $79.9 million, according to a Center for Tax Policy report.

But some studies, including a 2005 report by two economic professors, warn that such amnesty programs could risk long-term losses in revenues if people simply decide not to file on time.

Farmer said that’s why he is urging Beshear to include safeguards in his proposal to require people to pay taxes each of the next five years or risk being hit with the back-penalties. He said that’s similar to a federal program.

So far, Beshear hasn’t unveiled the details of his proposal. Spokesman Terry Sebastian said no decisions have been made about what, if any, safeguards should be built into the program and whether it will be rolled out as legislation or can be done through executive order.

- Interview and video by Nick Storm with additional reporting by Ryan Alessi


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