The N.J. Assembly Appropriations Committee has proposed New Jersey’s third tax amnesty in less than 15 years. Tax amnesty allows those capable of paying their taxes, interest and penalties to pay only the tax, without interest and penalties. In 1986, New Jersey offered its "one and only" tax amnesty. In 1996, New Jersey offered its "last" tax amnesty. Each was coupled with a promise of greater enforcement of those who cheat each of us.
Quite simply, a third tax amnesty is a bad idea! As a tax professional, I have come into contact with taxpayers who have been planning since the last amnesty in 1996 for the amnesty now proposed. They are figuring out how to beat the system, while the majority of us continue to support New Jersey’s government programs through our tax dollars.
Also, amnesty is not necessary. N.J.’s Division of Taxation is already using installment agreements for those who need time to pay, and closing agreements to maximize New Jersey’s tax collections for those who are unable to pay. I view such closing agreements (although the Division of Taxation may disagree) as "means-tested amnesty." Collect what you can from people and then let them live their lives. I believe these programs should continue and, possibly, be expanded.
The true test of political leaders is whether they can resist establishing bad policy in order to quickly bring in some dollars. The long-term effect of a third tax amnesty in New Jersey will be to reduce the public’s confidence in the tax system, which will lead to reduced tax collections going forward.
The state already has the tools to increase tax collections without increasing tax rates or providing amnesty. For example, the state abandoned successful programs targeted at businesses to collect use tax (which is the equivalent of sales taxes for products purchased from outside New Jersey). They have also proven that they can collect from cash businesses (e.g., liquor stores) through the use of various techniques. And they have not yet become aggressive with repeat violators of our employment tax laws … those who refuse to withhold taxes from employees.
Paying tax is the price of living in a civilized society with the freedoms that we enjoy. I am willing to pay my fair share. I am willing to subsidize those unable to pay. However, I am not willing to subsidize those waiting for the next amnesty … those able to pay who choose not to pay.
In arriving at the end of the current term of the Legislature, I would prefer to see our rights as taxpayers expanded in New Jersey, rather than a one-time amnesty fix. For example, a basic tenet of federal law is that an individual may claim a refund within two years of payment, with no limitation. Unfortunately, the New Jersey law places several obstacles in its refund rules which limits our ability to claim refunds. A bill, A-3757, sponsored by Assemblyman Richard Bagger (R-22), conforms New Jersey’s refund rules to the federal law. That bill has already passed the Assembly (78-0) and has moved onto the state Senate.
The impact of the federal rule is, when a taxpayer is unable to pay, the IRS will listen to the merits of the taxpayer’s case. If the IRS is able to enforce collection at a later date, the taxpayer will still have the right to claim a refund within two years. Thus, it is in the interest of the IRS to resolve cases at the lowest level. And many cases are resolved even though the tax has been unpaid. New Jersey should follow this lead and make A-3757 law.
I urge everyone to contact his or her legislators today (you can find their names at http://www.njleg.state.nj.us/html/members.htm), and urge them to oppose any bill offered on tax amnesty. While you are at it, ask your state senator to pass A-3757.
E. Martin Davidoff
certified public accountant
attorney at law
Dayton