State Budget Assumes $75M In Additional Delinquent Tax Collections
(Updated 8 p.m.) Some lawmakers on the Finance, Revenue, and Bonding Committee were surprised to learn Saturday that the 2015 budget will rely upon an additional $75 million in tax collections.
Rep. Sean Williams, R-Watertown, called the $75 million change in revenue collection estimates “drastic,” especially considering the drop in revenue estimates and the elimination of keno from the budget.
Sen. John Fonfara, D-Hartford, co-chairman of the committee, said the number reflects what the Department of Revenue Services believes it will be able to collect in unpaid taxes.
Following the successful tax amnesty program which brought in about $190 million in revenue when the state had estimated it would bring in about $35 million, Fonfara said the department is confident it can find that money through “enhanced” collection efforts.
The amnesty program, which ran from Sept. 16 to Nov. 15, 2013, allowed individuals and businesses who owed back taxes to receive a 75-percent reduction in the interest owed as part of the program. The opportunity to take advantage of that reduction in interest no longer exists, but state budget director Ben Barnes believes they still will be able to collect more delinquent taxes than in previous years based on the success of the amnesty program.
During that program, Barnes said the department learned there were more taxpayers willing to pay back taxes owed to the state, but they were unable to find the cash in order to take advantage of the program last year.
“There were significant amounts of tax liability identified during that process that the taxpayer could not resolve for a couple of reasons,” Barnes said. “One, the economy has been poor. These are people who have had business problems or an inability to pay taxes in the past so they didn’t have the cash. Two, access to credit has been relatively poor coming out of the recession . . . so they were able to identify during this process significant amounts of tax liability.”
Ultimately, “they believe there’s a reservoir they can relatively easily identify of unpaid taxes that they can undertake to collect,” Barnes said.
Those taxpayers may be in a better position to address those unpaid taxes than they were a year ago because the economy is improving, he said. The program will be offered without an incentive to the businesses and individuals that owe back taxes. Connecticut charges about 12 percent interest on delinquent taxes.
Williams and his Republican colleagues weren’t as confident as Barnes that the state would be able to find the delinquent tax revenue it needs to balance the budget.
Williams said it bothers him that this is the first time he’s learning that the Department of Revenue Services believes it can collect this amount of additional revenue.
“It hasn’t been discussed here before,” Williams said. “It hasn’t been vetted.”
He pointed out that the $75 million was not included in the budget Malloy presented to the General Assembly in February or the budget the Appropriations and Finance Committee approved in April.
According to a May 3 letter from the nonpartisan Office of Fiscal Analysis, it was unable to independently verify exactly how the state would obtain the additional revenue.
“We have sought but not been able to obtain other information to support the $75 million in enhanced collection initiatives,” Alan Calandro, director of OFA, wrote in a letter to House Minority Leader Lawrence Cafero.
“Based on the amount of revenue that was achieved as a result of the FY 14 Amnesty Program it is not impossible to expect to obtain $75 million in additional collections next year through some range of new mechanisms that are able to collect revenue not previously available. In FY 14, $35 million was budgeted for this initiative and $192.6 million has been collected,” Calandro wrote.