Louisiana taxpayers- have we got a deal for you!

You’re not really going to pay your Louisiana state taxes on time are you? Why on earth would you do that? Why not do what so many other Louisianans do. Hang on to your money or invest it or spend it. Nothing is likely to happen. And before you know it, the state will kick in with a really great amnesty program where you pay no penalties. That’s right, no penalties. Zilch. Nothing.

And hey, it gets better. When the time eventually comes, you’ll only have to pay one half of any back interest. What a deal. Heck, paying Louisiana taxes on time is only for fools. So go ahead. Game the system. A lot of others do, and they reap big benefits. It’s the Louisiana way. Or so it would seem, judging from the message being sent by the state.

The Louisiana legislature, in its collective wisdom, authorized what is called the “Fresh Start” program, offering a chance to catch up on back taxes to all those folks worried about being caught and labeled tax cheats. And of course, that’s exactly what they are. The current program just ended and it was a bountiful success. Over $435 million was collected with a net loss of millions of dollars to honest Louisiana tax payers.

So who are these slackers who are taking advantage of Louisiana’s laxness toward collecting legitimate taxes which Louisiana calls a “tax amnesty program?” Well, they’re not individuals who have a conscience that is bothering them. No. Eighty percent of the money collected came primarily from business accounts that were being audited or litigated. In other words, these delinquent taxpayers knew full well that the Louisiana Department of Revenue was on their case and would demand back taxes with full penalties and interest. So knowing that the jig was up, and these delinquent companies were right on the verge of getting stuck with big penalties, they merely opted to grab the amnesty crutch, not pay what they lawfully owed the state, and laugh all the way to the bank with the money they cheated out of the rest of us.

And get this — according to a press release sent out by the Louisiana Department of Revenue, the department will keep some 25 percent of the money generated through the tax amnesty program. In other words, the Revenue Department will keep over $80 million dollars “to replace penalties and fees waived under the program.” None of this money will go into the state treasury. This revenue, instead, will go to the Louisiana Department of Revenue. Does this make any sense?

The Revenue Department knew that they had these delinquent taxpayers by the neck, and that they would have collected the money the department was owed anyway. The amnesty program lets delinquent taxpayers off the hook, and the Revenue Department doesn’t loose a penny of their expected income. The losers? As is generally the case, the taxpayers. Either they get less in services from the state, or more taxes are charged to make up for the lost revenue.

So how could it get any better? Well it does. If you hire a lawyer to help you save all these taxes you should have paid in the first place, you can deduct all your legal expenses — from both the state and he federal government. Just grab Form 1040, and under Schedule A, write off all your legal expenses. And voilà! All the more money taken away from the state treasury.

Look, the state should be up front and honest about this program. This isn’t “newly found” money. As the Public Policy Foundation report finds: “States like to announce how much revenue comes in the door during the amnesty period but usually do not account for the fact that most of these taxes would’ve been collected in due course. Many taxpayers who take advantage of amnesties have already been identified by tax administrators as either delinquent or underreporting. In these cases, it’s likely the taxes and penalties would have been collected by the state anyway.”

Legislators love the amnesty program because it brings in one time money to fatten up the state treasury. But the wrong message is being sent. Louisiana is rewarding tax delinquents and has created a system that is inherently unfair to the vast majority of law-abiding taxpayers who follow the rules.

This amnesty plan should not be viewed as a revenue solution. It’s an income problem where Louisiana is spending more than it is taking in. A quick fix by giving tax dodgers a special bonus is not the solution. The legislature should go back to the drawing board and abolish this tax favoritism that benefits the few at the expense of those who have followed the law. Now, that would be good tax policy.

– Jim Brown

This article originally published in the December 30, 2013 print edition of The Louisiana Weekly newspaper.