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The Journal Gazette

  • Karickhoff

  • Ross

Sunday, January 10, 2016 10:00 pm

Let off the hook

Gov. Mike Pence is likely to score the Regional Cities money he needs to reward northeast Indiana and two other regions for their successful proposals. But he’s not getting it without some grief from House Speaker Brian Bosma.

The Indianapolis Republican first complained that Pence’s office could have "picked up the phone" to alert legislative leaders that the Indiana Economic Development Corp. wanted to give funds to three regions instead of the two originally proposed.

Last week, Bosma told reporters that Pence’s request reminded him of a daughter with a puppy saying "Mom says I can keep this unless you say no."

As one of three metro regions with a new "puppy," we’re happy to know Bosma expects the additional $42 million in tax amnesty collections will be approved. But we also must note that the method of paying for Regional Cities is hardly ideal.

In a last-minute deal, the General Assembly last spring approved a tax amnesty collection, earmarking $84 million for the initiative and $6 million to continue rail service between Indianapolis and Chicago. The state hired Navient Corp., the nation’s largest student loan collector, to run the program in exchange for a share of the take. 

Amnesty, of course, targets tax scofflaws – individuals and businesses delinquent on their obligations. If allowed at all, the chance to pay up without penalty should come rarely. Indiana’s last amnesty period was in 2005.

Justin Ross, an associate professor at the School of Public and Environmental Affairs at Indiana University-Bloomington, told Indiana Public Media in June that such programs teach taxpayers how to evade the system.

"One of the unique things about American taxpayers is we’re generally a pretty compliant bunch," Ross said. "There are documented cases where some taxpayers learned through the amnesty just how easy it was to evade and then never came back."

 In a 2012 SPEA publication, the tax policy expert pointed to research showing as much as 17 percent of an amnesty’s revenues are "strategically delayed" payments. In other words, some taxpayers simply withhold payment until the amnesty period opens.

Then there’s the method of collecting amnesty revenues. Without approval of the Indiana Department of Revenue, Navient sent about 150,000 taxpayers a letter suggesting back taxes were owed even though they did not, in fact, owe those taxes. Under its pay-for-performance contract, Navient earns more for every late tax dollar collected.

"For lack of a better term, it was a fishing expedition," Rep. Mike Karickhoff, R-Kokomo, said Friday. He filed House Bill 1203 this month to offer a tax credit to anyone who received such a letter and unwittingly made a tax payment.

"There were people who got the letter and rather than pay their accountant and go back over their taxes, they thought it was cheaper to pay what was suggested," Karickhoff said, "I don’t know if it affects 500 people or 50 or five. But for those people who did react quickly, they shouldn’t be penalized."

The misleading letter aside, the amnesty approach is poor tax policy.

"I don’t see the amnesties states run as generally good practice when they’re just trying to find a way to fund some special program," Ross said in June. "If it’s important enough to do with amnesty revenues, it should have been important enough to do with general funding."