Evaluating the Use of Tax Amnesty by State Governments

Author(s): William M. Parle and Mike W. Hirlinger

Source: Public Administration Review, Vol. 46, No. 3 (May - Jun., 1986), pp. 246-255
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246

Evaluating the Use of Tax Amnesty

by State Governments
William M. Parle, Oklahoma State University
Mike W. Hirlinger, Graduate Student, Oklahoma State University
With states finding it more difficult to raise taxes and

* This article identifies major issues underlying the use

with declines in federal funding for many types of pro-

of tax amnesty by state governments and empirically

grams, states are interested in maximizing the revenues

examines experience of states with amnesty programs.

available from current tax sources by improving the

The study is based on a survey of state fiscal agencies

design and administration of current systems. Tax

conducted in the summer and fall of 1985. Considered

amnesty programs are currently enjoying great

first are when and under what circumstances amnesties

popularity with state governments which see them as a

are likely to be effective. Criteria developed in that

low cost means of collecting delinquent taxes and im-

analysis are then employed as a framework to compare

proving long run compliance with tax codes. Typically,

experiences of 13 amnesty states. Factors examined

these programs provide delinquent taxpayers with a

include planning, structure, performance, and politics.

Concerns about current uses of tax amnesties are dis-

one-time opportunity to clear their accounts by paying

back taxes and interest without being subject to criminal

cussed, and suggestions are made for implementing

or civil penalties.

amnesty programs.

Recent interest in tax amnesty programs appears to

have been triggered by the favorable experience of

Arizona and Massachusetts. Arizona conducted the first

of the current round of programs in 1982 in response to

A more theoretical approach to the topic of amnesty

a budgetary crisis. The program produced a financial

is taken by John Mikesell in a recent article in State

windfall of $6 million. In 1983 Massachusetts conducted

Government.3 Mikesell argues that at least three

what has come to be regarded as one of the most suc-

theoretical considerations are important in the use of

cessful of the current amnesty programs. This program, amnesty. Briefly, these include: (1) the preceived
which was part of an extensive effort at revenue reform,fairness of such programs in societies whose tax systems
depend largely on voluntary compliance, (2) the necessiproduced an initial revenue windfall of approximately
ty that the amnesty program be viewed by taxpayers as a
$84 million during a three-month amnesty period. Between November 1982 and August 1985, thirteen states

one time chance rather than a reoccurring opportunity,

conducted major tax amnesty programs. According to

and (3) the coupling of the amnesty program with tax

the National Conference of State Legislatures (NCSL),

reforms designed to discourage back sliding on the part

which serves as a clearinghouse for amnesty informa-

of former amnesty participants. Mikesell is able to cite

tion, six more states will complete amnesties in 1985-

some limited evidence from the rather thin empirical

86.'

literature on tax amnesty to support his contention that

These programs have attracted considerable attention

these are important considerations. He also provides

among elected officials and public administrators con-

some data on current state amnesty efforts which serve

cerned with fiscal policy, but there has been little

to illustrate the recognition of the importance of these

systematic assessment of the states' experience with

amnesty to date. The most comprehensive report on the
amnesty experience of the states is "Tax Amnesty: A
Revenue Alternative," which was published by the National Conference of State Legislators as part of their

concepts by state policy makers. However, while arguing his case convincingly, Mikesell limits himself to a
theoretical discussion of these issues. He does not attempt to treat the performance of current state amnesty
programs empirically.
This study seeks to bridge the gap between detailed

series State Legislative Reports.2 Prepared by NCSL

researcher Corina Eckl, this report offers concise and

description and general theory by providing a

useful summaries of the major features of each state's

preliminary empirical assessment of the performance of

program, as well as some brief, common sense, sugges-

current state programs. To learn more about the design

tions on designing an amnesty program. This study was

and performance of these programs, this research com-

originally released in May 1984 and was updated in

pares 13 programs conducted by state governments

March 1985. It is intended as a description rather than

an assessment of what states are doing in the area of

(1) program planning, (2) program structure, (3) pro-

amnesty.

gram performance, and (4) program politics. This

since 1984.4 The dimensions of comparison include:

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EVALUATING THE USE OF TAX AMNESTY BY STATE GOVERNMENTS 247

analysis of state experience provides insights into how

noncompliance with tax codes, which are based on a

such programs may be designed more effectively. It also

high degree of voluntary compliance. Although the

provides indicators of the overall utility of amnesty pro-

issue of fairness has not been a serious problem with

grams as devices for improving revenue administration.

current amnesty programs, it cannot be taken lightly.

Most of the data on which this study is based was col-

Opponents of amnesty frequently argue that it is unfair

lected through a survey of state fiscal agencies con-

to those who pay their taxes as well as morally unaccep-

ducted in the summer of 1985. States were initially sent

table in a general sense to allow those who have cheated

a questionnaire asking them to provide information on

to avoid the legal consequences of their actions. Pro-

various aspects of their programs, and they were later

ponents generally counter this argument by pointing out

contacted by phone for more detailed information.5

that the ultimate effect of the program will be a more

equitable distribution of the tax burden as delinquents

Amnesty Goals and Design Considerations

are brought into the system. They also point out that

amensty participants must still pay interest on delinStates typically hope to accomplish three goals

quent taxes and thus have not benefited financially from

through the use of tax amnesty programs: first, to collect outstanding tax revenues inexpensively, including

their delinquency.

revenue which might be otherwise uncollectible due to

All of the amnesty states have made money

with their programs. This seems clearly
attributable to the low costs of such programs compared to traditional methods of
identifying tax delinquents and collecting
back taxes.

the limited availability of enforcement resources. Second, to promote improved future citizen compliance

with the tax code. And, third, to bring into the state's
revenue system individuals who have somehow manag-

ed to remain outside the tax rolls and who are thus not
easily detectable by other means. Attainment of these
goals is theoretically measurable in terms of the
amounts of revenue initially produced by the program,

A third consideration is the relationship of the amnes-

the amnesty windfall, and the long-term fiscal benefits,

ty program to the more general issue of revenue system

i.e.: higher than anticipated tax revenues in the periods

reform. Reform appears essential if long-term fiscal

following the program.

benefits are to be achieved. If amnesty participants face

When asked to rank these goals in order of impor-

the same incentives to engage in tax delinquency after

tance, revenue officials tended to place greater emphasis

the program as they did before, little or no permanent

on long term goals, seeing achievement of these objec-

change may occur in their behavior. This argument sug-

tives as potentially leading to the greatest fiscal benefit.

gests that amnesty programs should be implemented in

They noted that while amnesties sometimes produced

concert with administrative or legal reforms designed to

surprising windfalls, the amounts were low when com-

increase the probabilities of delinquents being caught to

pared to total state spending.

increase the penalties for tax delinquency, or both. The

The desire to achieve these goals, and the literature on

various state programs examined here show con-

amnesty theory suggest that several factors must be

siderable variation in the extent to which they are coupl-

carefuly considered in designing an amnesty program.

ed with other revenue system reforms.

First, amnesty theory suggests that amnesty programs

A fourth consideration in program design is public

will work only if they are used infrequently and ran-

relations. If the goal of the program is to effect the

domly. Frequent or predictable use of amnesties, it is

behavior of large numbers of taxpayers, a fairly major

argued, would adversely effect taxpayer behavior by

effort is necessary. Of equal importance is the message

to be communicated. This involves considerations of

providing an economic incentive for tax delinquency.

There is some empirical support for this argument.

program strategy. Publicity must provide citizens,

Mikesell, for example, cites data from India which

shows repeated participation by the same individuals in

generally, with a positive view of the program and its

goals and should contain a specific appeal to potential

successive amnesty programs.6 From a design standpoint the one time character of amnesties suggests that

amnesty participants. Several states have used a carrot

extra care should be taken in the planning, implementation, and timing of such programs since there will be no
second chance to correct miscalculations.

grams to taxpayers. Amnesty is the carrot, and more

A second important factor is the question of citizen

perception of the program's fairness or equity. This is
potentially the most controversial aspect of amnesty. A

and stick approach in presenting their amnesty prorigorous enforcement policies the stick. For example,

Massachusetts engaged in a vigorous and well publicized

prosecution program aimed at tax delinquents prior to
announcing its amnesty program, a strategy which they
recommend to others. Oklahoma ran television spots

general perception that amnesty was unfair might lead

during its amnesty period which showed cell doors clos-

to negative political reactions, and perhaps to increased

ing on a convicted tax offender while a solemn voice

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248

PUBLIC

ADMINISTRATION

REVIEW

TABLE 1

Revenue Estimates and Revenue Outcomes for Amnesty States

Total

State

Revenue Basis of Actual Percent Over

Originally Original Revenue or Under

Estimated

Estimate*

Collected

Estimate

AL None made N/R** 3,140,000 N/A***

AR None made N/R 6,000,000 N/A
ID
NR
N/R
300,000
N/A
CA 66,000,000 1,2,3 144,000,000 + 118%
IL 20,000,000 3,4 154,000,000 +670%
KS
None
made
N/R
600,000
N/A
MA 4,000,000 1,4 84,000,000 +2000%
MN 5,000,000 3 12,000,000 + 140%7o
MS
2,000,000
2
900,000
55%o
ND None made N/R 187,000 N/A
OK 5,000,000 3,4 13,900,000 + 178%7o
PA 2,000,000 2 2,452,498 + 23 %o
TX None made N/R 398,000 N/A
*1-Examination of other states' experience
2-Compliance data
3-Professional intuition
4-Rough guess
5-Other
**No response
***Not applicable

delivered the message: "You can pay now or you can

vided to facilitate comparison. The variable "basis of

pay later." Oklahoma officials credit this strategy with

estimate" represents the response to a closed-ended

being effective despite the fact that Oklahoma did not

question which asked respondents on what basis the in-

actually prosecute any tax delinquents immediately

itial revenue target was set. The choice of responses in-

prior to or during its amnesty period.

cluded: (1) "based on an examination of the experience

Finally, costs and benefits are a major factor in the

of other states"; (2) "based on an analysis of com-

consideration of any public program. Current ex-

pliance data developed by the state"; (3) "professional

intuition"; (4) "rough guess"; and (5) "other."

perience indicates that the overall cost benefit ratios for

recent amnesty programs are quite favorable. All the
amnesty states have made money with their programs.

As the data presented in Table I reveal, five states did

This seems clearly attributable to the low costs of such

not make an initial estimate of the amount of expected

programs compared to traditional methods of identify-

revenue. The remaining states, with the exception of

ing tax delinquents and collecting back taxes. Perhaps

Missouri, underestimated the revenue ultimately

the important question is the extent to which states have

generated. In several cases the estimates were strikingly

been able to maximize the benefits potentially obtain-

low. Inaccurate estimates may be the result of the

able through the use of tax amnesty programs.

limited experience that states have had with amnesty

programs. Estimates are no doubt also influenced by

Program Planning and Program Structure

what one official described as "the need to be conservative." However, indications are that the states did not

Program Planning

use all the data or methodological tools available to

them in making their original estimates. It appears that

To achieve insight into the quality of the planning

high reliance was placed on professional intuition or

which ceded these programs, respondents were asked to

educated guessing. Only two states, California and

provide information on the estimate of total revenue in-

Missouri, indicated that they based their approaches en-

itially established for their state's program, as well as in-

tirely or in part on compliance data. Compliance data is

formation on how this target was set. This data is sum-

developed to give revenue officials some idea of what

marized in Table 1 along with data on the total revenue

proportion of taxes owed are actually collected by the

ultimately attributable to each amnesty program. An in-

state, obviously an important initial consideration in the

dex of the accuracy of the original estimate is also pro-

decision to undertake an amnesty program.

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EVALUATING THE USE OF TAX AMNESTY BY STATE GOVERNMENTS 249

A lack of useful information on the effectiveness of

compliance and collection procedures goes beyond the

relatively rare need for such data in planning an amnesty program. Such information is also vital for assessing

TABLE 2
Relationship of Amnesty to
Other Enforcement Strategies
as Characterized by Respondents

the effectiveness of routine collection procedures. The

unexpectedly large amnesty windfalls generated by

several states are themselves a comment on the effec-

tiveness of state compliance and collection procedures.

Amnesties that produce large windfalls may be gratifying, but they can and do give revenue officials and taxpayers second thoughts about the effectiveness of state

compliance and collection procedures.

Another aspect of program planning is the linking of
amnesty to the introduction of other reforms in the

state's compliance and collection system. Amnesty

theory suggests that such linkages may be an important

factor in determining fiscal benefits beyond the amnesty

period. To ascertain the relationship between amnesty

programs and other types of reform activity,
respondents were asked to characterize changes in en-

forcement policy which accompanied their amnesty programs. These responses are summarized in Table 2. As
Table 2 indicates, in virtually all the states, amnesty was
coupled with some attempt to strengthen state compliance and collection policies and procedures. These efforts ranged from merely stricter enforcement of existing policies to comprehensive reform packages with

AL Amnesty preceded by a new tax enforcement and compliance

law which increased civil and criminal penalties for evasion and
delinquency.

AR Amnesty accompanied by stricter enforcement of existing compliance and collection policy.

CA Amnesty was the first step in a comprehensive program to
improve long term compliance with state tax laws.

ID Amnesty accompanied by stricter enforcement of existing policies. This involved the creation of a special "Tax Discovery

Unit" to identify nonfilers of personal and corporate income

tax returns.

IL New legislation increased civil penalties by 50 percent and also

increased criminal penalties. The new legislation became effec-

tive the day after amnesty ended.

KS Amnesty accompanied by a program to identify income tax

nonfilers.

MA Amnesty was part of a comprehensive "revenue enforcement

and protection program," which made tax evasion a felony in

Massachusetts. Amnesty was accompanied by extensive planning and stricter enforcement activities before and after the
amnesty period.

MN Adopted a business license clearance policy. The policy provides that any licensed business owing in excess of $1,000 in

sales or withholding taxes may have its license withheld until

taxes are paid.

pre-and post-program components involving extensive

MO Stricter enforcement policies.

legislation. The more comprehensive reform efforts

ND Stricter and more comprehensive enforcement of existing poli-

focused on providing revenue agencies with more

cies supported by the authorization of 16 new audit and com-

resources, granting revenue agencies new legal authori-

ty, and increasing the penalties for tax delinquency.

pliance positions.

OK Amnesty accompanied by stricter enforcement of existing policies plus additional audit and compliance positions.
PA The use tax self-audit program was accompanied by an increase

Program Structure

in interest rates on tax delinquencies.

TX Stricter enforcement of existing policies.

The data collected for this study permit comparison

of some of the major structural features of the different
state programs. Broadly conceptualized these include: (1)
tax coverage and eligibilty (the types of taxes and tax-

only three states, Idaho, Pennsylvania, and Texas, had

payers covered under the program), (2) public relations

limited amnesty programs. Idaho's program covered in-

(the character and extent of the effort made to inform

come taxes, Pennsylvania's covered use taxes, and

potential participants about the availability of the pro-

Texas's covered business license fees.

gram), (3) accessibility (the ease with which taxpayers

were able to participate in the program), and (4) program cost. Tables 3 and 4 provide some information on
how the various state programs dealt with these major

Eligibility for amnesty participation may extend to all

or a relatively large number of taxpayers, or it may be

limited solely to nonfilers unknown to state revenue

authorities. As Table 3 indicates, only the programs in

Idaho and Missouri were limited to unknown nonfilers.

design considerations.
In terms of coverage, an amnesty program may be

Discussions with state revenue officials revealed that

very limited, covering only a single type of tax, or it may

three factors may have played a role in the preference

be very general, covering most or all of a state's important taxes. Programs classified as general in Table 3 are

for general amnesties. First, it may be easier to obtain

political support for a general amnesty program for

which virtually all citizens are eligible. Second, general

those which covered at least income and sales taxes, the

two largest revenue sources of state government. Currently, the general amnesty appears to be the most

amnesties have the potential to produce large financial

windfalls. In many states amnesty was in part a response

favored approach. Of the 13 programs considerd here,

to the fiscal stress of the early 1980s. Third, the publici-

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250

PUBLIC

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REVIEW

TABLE 3
Amnesty Program Characteristics
State Amnesty Period Coverage* Eligibility** Publicity***
AL 1/20/84-4/1/84 General General Moderate
AR 11/22/82-1/20/83 General General Moderate
CA 12/10/84-3/15/85 General General Strong
ID 5/20/83-9/20/83 Limited Nonfilers N/R
IL 9/1/84-10/30/84 General General Strong
KS 7/1/84-9/30/84 General General Weak
MA 10/17/83-1/17/84 General General Strong
MN 8/1/84-10/31/84 General General Weak
MO 9/1/83-10/31/83 General Nonfilers Very Weak
ND 9/1/83-11/30/83 General General Weak
OK 6/1/84-12/30/84 General General Strong
PA 3/1/83-6/30/83 Limited Limited Strong
TX 2/1/84-2/29/84 Limited Limited Weak

*General amnesties are those which include at least pe

of tax, in this case, income taxes in Idaho, use taxe

**General-All

or

most

taxpayers.

Nonfilers-Restricted to unknown nonfilers only.

Limited-Eligibility limited due to limited tax coverag
***Very weak-Press releases only.

Weak-Press releases and public service spots in television, radio, and print media.
Moderate-press releases, public service spots, and some paid media advertising.
Strong-Press releases, public service spots, and more extensive paid media advertising.
N/R-No Response.

ty costs of conducting a limited amnesty may be com-

parable to those of conducting a general amnesty.

More variation was found in the public relations ef-

Finally, states varied considerably in terms of the investment that they were willing to make in amnesty programs. Some states made no specific financial allocation

forts made by states to inform taxpayers of their pro-

while other states appropriated funds. Those states with

grams. These efforts ranged from weak in states like

amnesty program appropriations are identified in Table

Alabama, Arizona, and Missouri, which relied ex-

4. That table also provides information on total and per

capita program costs. Although not a structural
characteristic per se, amnesty funding is an important
indicator of the level at which the states were able to

clusively on news releases and public service spots, to

strong in states like Illinois, California, and Oklahoma,
which purchased relatively large amounts of commercial
advertising; including newspaper, billboard, radio, and

support various program activities, including public

television exposure. The limited use of media on the

relations.

part of some states seems somewhat surprising in view

While the variations described above do not begin to

of the fact that a major aim of most of these programs

exhaust the differences among state programs, they do

provide a rough framework for assessing the impact of
some program characteristics on program performance.

was to influence large numbers of taxpayers. Intuitively,

extensive publicity concerning the program and its relationship to tax policy would seem to be an important ingredient for program success. However, the unwill-

Program Performance

ingness of some states to spend on publicity, the major

fixed cost entailed in an amnesty program, may be the

result of efforts to make the program more appealing to
legislators and other policy makers by keeping costs as

Data was collected on both subjective and objective

indicators of program performance. Subjective in-

participate in the program. One obvious indicator of accessibility is the length of the amnesty period. Amnesty
is only made available to taxpayers for a limited period
during the tax season. Amnesty periods ranged from 60

dicators of program performance are perceptual

measures of how successful the program was from the
point of view of the state officials involved. Objective
measures are attempts to quantify program performance to permit more rigorous comparisons.
Two subjective measures of overall program performance were employed, as well as separate indicators of

to 180 days for the programs examined here.

both long-term and short-term performance. First, the

low as possible.

Accessibility refers to the ease with which citizens can

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EVALUATING THE USE OF TAX AMNESTY BY STATE GOVERNMENTS 251

TABLE 4
Amnesty Performance Indicators
Total Per Capita Total Per Capita
Amnesty Amnesty Program Program Number of

State

Revenue

Revenue*

Costs**

Costs*

Returns

AL
3,140,000
.80
30,000
.01
10,150
AZ 6,000,000 2.04 100,000 .03 10,600
CA 144,000,000 5.79 2,800,000 .11 152,000
ID
300,000
N/A
N/R
N/A
900
IL 154,000,000 13.45 2,000,000 .18 27,500
KS
6,000,000
.25
25,000
.01
750
MA 84,000,000 14.60 2,253,000 .39 52,000
MN 12,000,000 2.90 250,000 .06 10,400
MO

900,000
.50
31000
.00
241
ND
187,000
.28
None
.00
630
OK 13,900,000 4.26 272,050 .08 56,500
PA
2,452,498
.21
36,645
.03
200
TX
398,000
.03
Minimal
.00
85

*Based
**Some

on
or

1983
all

respondents were asked to rate the overall success of

population

funds

were

estim

receiv

to $14.60 in Massachusetts. Per capita costs ranged

their amnesty program in meeting their original expecta-

from less than a penny in Missouri to $.39 in

tions. Second, respondents were asked if they felt that

Massachusetts. Texas and North Dakota absorbed costs

state officials would have supported such a program

into existing budgets but indicated that they had been

originally had they known at the beginning of the pro-

tiny. The relationship between per capita revenues and

gram what they now know as a result of the program.

program costs is presented graphically in Figure 1. As

Nine states regarded their programs as having been

Figure 1 indicates, a very close relationship exists be-

" very successful," while two states, Kansas and Texas,

saw their programs as having been "moderately success-

tween the amount spent on the amnesty program and

the revenue it generated. The curve produced by the

ful." Only one state, Missouri, found its experience withdata suggests that the marginal benefits of increased
amnesty to have been "'somewhat disappointing." All
program spending rise sharply to a level of about $.20
states but Missouri indicated that they would be willing

per capita and then begin to decline rapidly. Optimal

to repeat their programs in the light of their present

program investment seems to occur between $.20 and

knowledge. On the whole, the states appear quite

$.40 per capita. While the data on which the curve is

satisfied with the results of their amnesty efforts. based are scanty, this finding strongly implies that many
To explore the short term benefits of amnesty, data
states are investing too little in their programs to obtain

was gathered on three additional indicators of program

performance. These included: (1) the total costs of the

program, (2) the total receipts generated during the
amnesty period, and (3) the number of taxpayers participating in the program. This data is summarized in
Table 4. To facilitate comparisons between the states,

optimal amnesty windfall benefits.

Cost benefit relationships such as those presented in

Figure 1 are helpful in explaining differences in program
performance, but they can mask or neglect other factors
which may have an impact on performance. How
money is spent may be as important as the amount

two standardized indicators, per capita amnesty revenuespent. Also, differences in program performance may
and per capita program cost, were computed by dividing be attributable to nonprogram factors such as the state's
wealth, tax structure, or level of tax compliance. That
total amnesty revenues and costs by a state's 1983
population estimate.7 These variables are also included
is, some state's programs may generate more revenue
in Table 4. Discussions with state officials indicated that
per capita because the state is wealthier, relies more on
the preponderance of amnesty revenue was collected
from personal income taxes.

An examination of the data in Table 4 indicates that

states have experienced considerable variation in the
cost, level of citizen participation, and performance of
their programs. The per capita revenue generated by

income taxes, or has a larger pool of uncollected taxes.

Data limitations make it difficult to explore fully all

such suspected relationships, but the impact of two nonprogram and two program variables is considered

below. These variables include: (1) state per capita income, (2) the percent of state revenue derived from pergeneral coverage programs ranged from $.25 in Kansassonal income taxes, (3) the publicity effort which ac-

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252

PUBLIC

ADMINISTRATION

REVIEW

FIGURE 1
Relationship of Per Capita Amnesty Revenue to Per Capita Program Costs

15.00

MA

14.00
IL

13.00
12.00

11.00
10.00

9.00
R 8.00
E
V 7.00

E/

6.00

CA

E 5.00

sK

4.00

3.00

2.00

MN

AZ

1.00
.90
.80 AL
.70
.60

.50 MO
.40

.30 i ND
.20 KS PA
.10

.00 TX
.00

.05

.10

.15

.20

.25

.30

.35

.40

COSTS

companied the state's amnesty program as characterized

in Table 3, and (4) the length of the state's amnesty
period in days. Because of data limitations, only general
amnesty programs are considered in this portion of the

analysis. Tax complaince was excluded as a nonprogram

factor because no suitable indicator could be found.

Correlation coefficients for these variables with per

capita amensty revenue are presented in Table 5. The independent variable-exhibiting the strongest relationship

with per capita amnesty revenue is publicity, also fairly

strongly related are per capita income, and percent of

state revenue derived from personal income taxes. Program length shows no relationship to per capita amnesty
revenue. To learn more about the independent impact
of publicity, a multiple regression of the three strongest
indicators was performed on the data. As the results
presented in Table 6 indicate, publicity remains a
significant factor even when personal income and
reliance on personal income taxes are taken into account. Other things being equal, publicity remains a

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EVALUATING THE USE OF TAX AMNESTY BY STATE GOVERNMENTS 253

TABLE 5
Relationship of Per Capita Amnesty Revenue
to Per Capita Income, Percent of State Revenue
Derived from Personal Income Taxes,
Amnesty Program Publicity, and
Length of Amnesty Program in Days
Variable

Corr.

Per

Income

Capita

Coe
.59

Percent of Revenue from Personal Income Tax .47

Amnesty Program Publicity .72*

Length of Amnesty Program -.01

TABLE 6
Multiple Regression of Per Capita Amnesty Revenue
with Selected Independent Variables
Variable

Std.

Per

Income

Capita

Coef.
.29

Percent of Revenue from Personal Income Tax .26

Amnesty Program Publicity .67*

*Significant at the .05 level.

Multiple R = .89

R Squared = .79

*Significant at the .05 level.

highly important factor in determining the amount of

Amnesty Program Politics

revenue ultimately generated by an amnesty program.

However, considerable caution should be exercised in
interpreting these results. The number of cases is quite
small, and the range of variation in some of the data is

The responses to several questions provide some insight into the politics of amnesty. The measures examined here include: (1) the ease of obtaining legislative approval, (2) interest group activity, and (3) perceptions of

very limited. For example, while program length did not

correlate strongly with amnesty revenue not much variation was found in this indicator. With one exception,

citizen reaction to the program. States differed in terms

programs were limited to either two or three months.

their program. Six states, Alabama, Arizona, Missouri,

Discussions with revenue officials indicated that,

North Dakota, Pennsylvania, and Texas, indicated that

of whether or not legislative approval was required for

regardless of length, amnesty applications typically rose

no legislative approval had been required. However,

steadily to peak toward the end of the program. Many

legislative approval was required in California, Illinois,

states handled this by giving amnesty "rain checks" to

Kansas, Massachusetts, Minnesota, and Oklahoma. In

those who contacted the revenue department in the last

states where legislative approval was required, state

days of the program. Thus, program length may not be

revenue officials were asked to characterize the level of

a precise indicator of program accessibility.

difficulty involved in securing such approval for their

The important question of whether recent amnesty

programs are beginning to produce long-term financial

that legislative approval had been extremely easy to ob-

benefits is even more difficult to explore. This is due in

tain. Illinois reported that approval had been obtained

part to the recency of some programs and in part to the

methodological difficulties of attributing current

obtaining legislative approval had been somewhat dif-

programs. Two states, Kansas and Oklahoma, reported

with average difficulty, and Minnesota indicated that

ficult. In Massachusetts little attention was focused on

revenue to past programs. However, respondents were
asked if they felt that their amnesty programs had pro- amnesty which was passed as part of a comprehensive
revenue system reform package.
duced benefits in the form of improved taxpayer comThe relative ease with which amnesty programs obpliance in the post-amnesty period. Four states,

Alabama, Arizona, California, and Massachusetts, felt

that their programs had clearly been followed by such
improvements. Kansas felt that its program had been
followed by some improvement in compliance. Missouri
saw few apparent benefits in terms of improved, postamnesty compliance. The remaining states felt, perhaps

tained legislative approval appears related to the general

correctly, that in the case of their programs it was too

the State Taxpayers Association had supported amnesty;

Illinois indicated that educational groups, who were

early to say. Informal discussions with state officials

revealed that few states are making a sophisticated effort to evaluate long-term amnesty impacts. Two
notable exceptions appear to be California and
Massachusetts, which have undertaken such projects.
Several officials indicated that their agencies did not
have the time and resources to do formal, long-term
studies of their programs' impacts.

lack of outside interest group activity which also

characterized amnesty initiatives. When state officials

were asked to identify interest groups which supported
or opposed the amnesty measure, only two were able to
identify any specific groups. Minnesota indicated that

designated to receive the amnesty windfall, were strong

supporters of the measure. Further discussions with
state officials indicated that the initiative for tax amnesty programs has come largely from state revenue

authorities or from legislators concerned with revenue

issues rather than from outside interest groups or the
grass roots. The diffusion of interest in amnesty has ap-

MAY/JUNE 1986

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254

PUBLIC

ADMINISTRATION

REVIEW

parently occurred more through administrative than

dude a lack of emphasis on long-term benefits, low

political channels.

levels of program funding, and little follow up in the

The decision to undertake a tax amnesty program

post-amnesty period. In practice, two general ap-

seems to focus on internal executive and legislative

proaches to amnesty are evident in this study. The first

politics. For example, New York, which as approved a

approach involves the use of amnesties in conjunction

program for 1986, reported that while no external in-

with comprehensive revenue reform programs in major

terest groups were directly involved, the governor and

efforts to improve taxpayer compliance with state tax

the Department of Taxation originally opposed the pro-

codes. The second focuses more on the short-term

gram but were convinced by the legislature to reverse

amnesty windfall. The comprehensive approach is clear-

their positions. For the most part, amnesty proposals

ly evident in Massachusetts where amnesty was a single

have been looked upon with favor by both legislative

component in a comprehensive "Revenue Enforcement

and executive groups. In only two states have amnesty

and Protection Program." Only California's program is

program proposals been rejected at higher executive or

similarly comprehensive. This is the most sophisticated

legislative levels. In Maryland, the General Assembly

approach to the use of amnesty, and many officials are

enacted legislation which authorized the comptroller of

convinced that it is the only appropriate use of amnesty.

the treasury to invoke an amnesty period if he felt it

Although precise evidence on the long-term fiscal

would be beneficial to the state of Maryland. After

benefits of amnesty is lacking, amnesty theory suggests

studying the matter the comptroller decided that an

that such benefits are unlikely to occur without a con-

amnesty period would not be in the best interest of all

current strengthening of compliance and collection pro-

the taxpayers of the state of Maryland. In Iowa, an

cedures. Because of the limited frequency with which

amnesty bill was introduced in the 1984-85 legislative

amnesty can be used effectively, states that conduct

session. According to revenue officials the bill received

amnesties in conjunction with minimal reform activity

strong support but ultimately failed to pass. There is a

may be wasting a valuable opportunity, particularly at a

strong possibility that the question will be considered

time when new data management technologies are mak-

again in the next legislative session.

Finally, once implemented, amnesty programs do not

ing it possible to identify and close many gaps in tax

compliance systems.

appear to produce much negative reaction from citizens.

While the case for reform in conjunction with amnes-

Respondents in ten of the states reported that citizen

ty is frequently made by revenue administrators, it is not

reaction to the program had been extremely favorable,

always evident in terms of program practice. Not all

while two stats, Kansas and Missouri, reported that

states have attempted to emulate the comprehensive ap-

citizen reaction had been neutral. In short, amnesty pro-

proach to amnesty taken by the Massachusetts and

grams appear to be relatively low-risk, political under-

California programs. Several states appear to have been

more interested in taking advantage of the short-term

takings.
Conclusions

economic benefits of amnesty while neglecting if not ignoring benefits which might be available if amnesty

This examination highlights many of the factors that

were an integrated component in a comprehensive

are contributing to the current popularity of tax amnes-

revenue reform strategy. This "take the money and

ty programs. These programs have consistently produc-

run" approach is particularly apparent in programs

ed respectable financial windfalls. While the amounts

characterized by poor planning and limited or piecemeal

generated may be small with respect to total state spending, they may be helpful in bridging a budget short

reforms.

fall. In relation to the benefits they produce, amnesty

analysis of cost performance data presented above

programs are relatively inexpensive to conduct and thus

strongly suggests that many states failed to obtain the

Regardless of the extent of reform activity, the

are easy to justify to policymakers on economic

maximum available financial windfall due to severe

grounds. Despite some opposition on moral grounds

elected officials and to the citizenry as a whole. Further-

underfunding of their programs. Low participation in

an amnesty program due to low levels of spending on
publicity or taxpayer service may hurt long-term as well

more, potential benefits include not just a one-time

as short-term benefits.

they have proven to be politically acceptable to both

financial windfall but an improved level of taxpayer

compliance as well.
Given the attractiveness of amnesty programs,

The third concern is raised by the unexpectedly large

amounts of revenue produced by many amnesty programs. As noted above, large amnesty windfalls are an

perhaps the central issue is whether the states are using

indication that reforms may be needed in the state's

amnesty in a manner to obtain the maximum possible

compliance and collection system. Properly designed,

amnesty programs could be useful in identifying specific

benefits. The data and analysis presented here raise a

number of concerns about current programs. These in-

areas where reforms are necessary. However, discus-

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EVALUATING THE USE OF TAX AMNESTY BY STATE GOVERNMENTS 255

sions with revenue officials revealed that, with few ex-

Notes

ceptions, obtaining data for revenue system reform has

not been a central concern in the design of amnesty programs. Also, few states have made or plan to make
reforms in their compliance and collection procedures
as the direct result of their amnesty experience.
For the states currently preparing for a general

1. These states include: Colorado, Louisiana, New Mexico, New

York, South Carolina, and Wisconsin.

2. Corina Eckl, "Tax Amnesty: a Revenue Alternative," State

Legislative Reports, vol. 9, (May 1984, updated March 1985),

pp. 1-11.

3. John Mikesell, "Tax Amnesties as a Tool for Revenue Ad-

amnesty program and for other potential amnesty statesministration," State Government, vol. 57 (1984), pp. 114-117.
as well, these concerns merit attention. While the use of
amnesty solely for the purposes of revenue enhancement

may be an appropriate option for some states, decisions

4. The states whose programs are considered here include:

Alabama (1983 Ala. Acts 891), Arizona, California (1984 Cal.

Stats., Chapt. 1490), Idaho, Illinois (1984 Ill. Laws, P.A.

831428), Kansas (1984 House Bill 3076), Massachusetts (1983

to undertake an amnesty program should not be taken

Mass. Acts Chapt. 233), Minnesota (1984 Minn. Laws, Chapt.

apart from considerations of revenue system reform.

402), Missouri, North Dakota, Oklahoma (68 Okl. Stat. Supp.

States considering an amnesty program should look

closely at their objectives in the area of compliance and

collection, and they should also consider carefully the

experience of other states.

1984, 216.1), Pennsylvania, and Texas. Some states did not require legislative approval.

5. The state officials contacted initially included: Ronald J.

Howard (AL), Greg V. Smith (AZ), John Vranna (CA), Nan K.

Hendrickson (IL), Harly Duncan (KS), Louis L. Goldstein

(MD), Debra L. Spoerk (MA), Edward C. Molotsky (MO),

Dorothy McClung, (MN), Abram J. Cuttler (NY), Kent Conrad

Mike W. Hirlinger completed his master's degree in

political science from Oklahoma State University in
August 1985. He is currently employed by Education
Support Personnel of Oklahoma.
William M. Parle received his MPA and PhD degrees
from the University of South Carolina. He is an assistant professor of political science at Oklahoma State

University, where he teaches public administration and

governmental budgeting and finance.

(ND), Tom Emmerich (OK), Arthur A. Florio (PA), and Harold

Lee (TX). These and other state officials went out of their way to

be helpful in providing information essential to this study.

6. Mikesell, p. 115.

7. U.S. Bureau of the Census, State Government Tax Collections in

1983.

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