Today I called upon the Governor and Legislature to enact a six month interest and penalty holiday to help struggling small business owners and other taxpayers who have fallen behind on tax payments during the recent economic downturn.
The state’s job is to collect taxes, not penalties and interest. Too often heavy penalties and punitive interest charges actually make it more difficult for struggling taxpayers to catch up on late payments. If we want more jobs, we need to help California’s job creators get back on their feet.
Instead of increasing taxes or cutting vital programs, we ought to learn from the experience of other states where these programs have successfully raised millions of dollars. I believe a California program would generate several billion dollars of revenues for state and local government.
A tax interest and penalty holiday would be a win-win for both California’s job creators and state coffers.
Below is the text of my letter. You can find my press release here.
June 10, 2011
Dear Governor and Legislative Leaders:
I am writing to urge you to include in your budget an interest and penalty holiday for delinquent taxpayers.
The severe economic downturn of recent years has proven difficult for many California taxpayers, including thousands of small business owners who are struggling to stay in business. As a result, many have fallen behind and now face steep penalties and interest charges that make it even more difficult for them to catch up. Accordingly, it seems timely to consider ways to help these taxpayers get back on their feet.
It has been many years since California offered a reprieve for delinquent taxpayers. In recent years other states have successfully implemented programs to spur catch-up payments. The revenue generated by many of these programs, including those in Illinois, Louisiana, and Pennsylvania, has greatly exceeded expectations.
In California up to $10 billion of delinquent accounts could be offered this relief. Based on the results of past programs and those in other states, an interest and penalty holiday could potentially generate several billion dollars of accelerated revenues for state and local government plus the payment of dollars we might otherwise never collect.
Rather than impose higher taxes on the people of California, it makes much more sense to incentivize payment of the billions of tax dollars already owed state and local government.
Thank you for your consideration. Should you have any questions, please do not hesitate to contact me.