By Howard Fine
Heads up, tax scofflaws.
Next week, the state embarks on its first general tax amnesty in 20 years, allowing individuals and businesses to pay back taxes on unreported income without fear of state penalties or prosecution.
State officials have factored $500 million to $600 million in revenue from the amnesty into the current budget. Any shortfall would be carried over into the 2005-06 budget, which already faces an $8.1 billion deficit.
State Assemblywoman Judy Chu, D-Pasadena, who authored the amnesty law last year, said the projection only is a fraction of the estimated $6.5 billion that California individuals and businesses owe in unpaid taxes,including $2.4 billion from small businesses and $1 billion from corporations.
Similar amnesties in New York, New Jersey and Illinois each have brought more than $500 million, she said.
One potential hitch: State tax collectors will share information about those who file during the amnesty period with the Internal Revenue Service.
“We do have an exchange of information agreement with the IRS,” said Denice Azimi, spokeswoman for the state Franchise Tax Board.
In recent months, the IRS has been going after individuals who have attempted to use questionable tax shelters. Azimi said it’s possible that some of those who come forward with the state could end up paying hefty penalties to the IRS.
Chu said many of those people eventually will be found out anyway. “There is more advantage to saving money in penalties on the state front than risking penalties from both the state and the feds,” she said.
Chu said she thinks the amnesty program will bring in more than expected, pointing out that a separate state amnesty program last year was projected to bring in $90 million. Instead, the final figure was $1.2 billion.
“My guess is that $600 million will be way too low a figure,” she said.
* * *
The Reason Foundation, an L.A.-based privatization think tank, issued a study last week calling for the construction of a $3 billion “toll tunnel” through the San Gabriel Mountains and the adding of toll lanes on several regional freeways.
In past years, such ideas might have been laughed at or shrugged off. But the Reason Foundation has wielded considerable influence with Gov. Arnold Schwarzenegger’s administration. One of its top officials, George Passantino, chaired Schwarzenegger’s California Performance Review, which last year issued a controversial 2,500-page report outlining what it claimed were billions of dollars in savings for state government.
Several Reason Foundation proposals found their way into the review, which the state Legislature will consider in coming months.
The toll road concept still faces significant hurdles. State officials are still smarting from a backlash against toll lanes on the Riverside (91) Freeway connecting Riverside and Orange counties. When it was revealed that the California Department of Transportation agreed not to make any improvements to the freeway as part of a “non-compete clause” with the toll lane operators, elected officials in both counties protested and the venture was aborted.
Robert Poole, the Reason Foundation’s transportation director, said no such clauses would be included in any future toll road agreements.
Fine is a staff reporter with the Los Angeles Business Journal.
