May 8, 2011 in City

Spin Control: Tax amnesty a windfall, but where’s the outrage?

By The Spokesman-Review
 

OLYMPIA – Business organizations regularly bemoan how little recognition, respect and support they get from the state. But evidence to the contrary was clear last week, when the state announced a “windfall” of some $321 million from a tax amnesty program.

It seems that when there’s something fishy about what they’ve been doing, businesses get the benefit of the doubt that poor people don’t.

Cheers for the money were second only to the Mariners’ improving win-loss record, and with good reason. The state originally thought it might pick up about $24 million by offering businesses a chance to clear up their tax debts without penalties or interest. It got $321 million – $264 million of which the state keeps after sending local governments their share – which is real money in anyone’s book. It offers the Legislature, in the words of Gov. Chris Gregoire, a chance to balance the state’s biennial budget and “go home.”

No one seemed concerned, however, about the reason for the unexpected bonanza. A total of 8,888 businesses got caught up on back taxes.

Normally, when a business, or any taxpayer, fails to pay a tax, it is hit with a fine and interest in part to emphasize the necessity of paying on time. Otherwise, the vast majority of us could adopt an “I’ll get around to it” attitude toward taxes.

The amnesty gave businesses a deal. Despite stiffing or short-changing the state, they got off with just taxes owed.

No one questioned the motives of those 8,888 companies – which included 428 unregistered businesses that never paid taxes and got right with the state over an average bill of $50,000. No one called them tax cheats, or deadbeats, or any other pejorative term. Their slate is wiped clean and no one even knows who they are. That’s what an amnesty is all about.

Tax information is confidential, and the state can’t even name the biggest tax “avoider” other than to say it’s a corporation that owed “tens of millions of dollars.” It was engaged in a legal battle, but decided to pay up rather than risk a loss in court, the fines, penalties and legal costs, Gregoire said.

The governor attributed the size of the unpaid-tax windfall and the number of companies to the economy, which is pinching many of us and forcing tough choices, such as: pay the employees or the bank or the tax man. Clearly some companies faced that choice, just as some families decided whether to buy food or gasoline or pay the light bill, falling behind for months until the lights went out or the Department of Revenue knocked on the door.

About three-fourths of the companies that were granted amnesty are classified as small businesses, with annual sales of $1 million or less. Small business is difficult and risky and prone to failure. But they accounted for less than 10 percent of the money collected, with unpaid taxes averaging less than $3,000.

Some overdue taxes go back four years, the Department of Revenue said, which predates the recession. And four-fifths of the overdue tax money collected, about $221 million, came from about 444 companies with gross sales above $20 million. Such businesses, one might assume, do not do taxes by buying a TurboTax CD each April; they have a staff of accountants, consultants and lawyers.

Yet there were no cries for investigations into how businesses try to fleece the state of the money they owe, no demands for a new legion of auditors in the Department of Revenue, no suggestion from any legislator that deadbeat businesses should be put to the rack for taking a free ride on things other taxpayers have been supporting for them, like schools, roads, colleges and law enforcement.

Compare that to revelations in recent months that some welfare recipients have been selling their food stamp cards for cash, or getting cash withdrawals by swiping the electronic benefits transfer cards at the ATMs of such unsavory places as casinos, bars and strip joints.

To be clear, it’s illegal to traffic in food stamps and to gamble with welfare money. Neither activity should be condoned, but neither costs the state hundreds of millions of dollars. Yet the demand for reform was loud and swift; legislation was drafted, hearings held, outrage voiced and a DSHS honcho resigned for suggesting that going after such miscreants might not be cost-effective.

This is not to suggest that there should be more recriminations in Olympia, which at times seems to run on rancor. Rather, there should be fewer, and judgment might best be doled out, and slack cut, equally.

Spin Control, a weekly column by Olympia bureau chief Jim Camden, also appears online at www.spokesman.com/ blogs/spincontrol.

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