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December 9, 2009: Controller Testifies on Tax Amnesty Program
Statement by
Hon. Alan Butkovitz
Controller
City of Philadelphia
December 9, 2009
I would like to thank Chairwoman Tasco and other members of Council's Committee on Finance for this opportunity to testify on behalf of a tax amnesty program for the City of Philadelphia.
I would especially like to thank and commend Councilwoman Krajewski for taking the initiative to draft tax amnesty legislation and introduce it in Council. The tax amnesty program was one of 10 action steps I recommended last May in a report I issued to help the city generate more revenue and improve tax collection and compliance.
Currently there is about $1 billion in uncollected taxes owed the City of Philadelphia. Implementing a tax amnesty program for Philadelphia is an opportunity to collect millions of dollars in delinquent taxes and provide much-needed funds to support essential city services.
The Administration is already projecting a $50 million budget deficit for next year, and potential deficits in the following years. The funds generated from a tax amnesty program could potentially eliminate or diminish this pending deficit.
The success of a tax amnesty program will depend largely on the City's willingness to adopt an aggressive mind set and strive to collect as much of the maximum amount owed as possible. A conservative collection rate of 10 percent would generate almost $100 million for city coffers.
Philadelphia implemented tax amnesty in 1986 when $86 million was owed. We generated $25 million back then -- a 29 percent collection rate - nearly four times more than what was originally projected.
Using today's technology to facilitate the easy payment of outstanding tax obligations on online, the City could also utilize an abundance of e-marketing strategies to reach targeted audiences. The City has an array of tools at hand to reach thousands of tax delinquents throughout the city beyond the traditional mailing and advertising methods of 20 years ago.
Other cities have collected millions in added revenue through their own tax amnesty programs. Phoenix, a city comparable in size to Philadelphia, collected 40 percent of outstanding tax obligations -- or $3.2 of the $8 million owed. Phoenix anticipated a 25 percent collection rate.
Oakland was owed $2 million for parking, hotel, real estate, business and rent taxes and ended up collecting $1.7 million -- almost the entire amount owed. Its goal was a 35 percent collection rate. San Jose provided an amnesty for business taxes only and almost doubled its goal by collecting $1.25 million, a 10 percent collection rate.
Pennsylvania’s Legislature recently adopted a tax amnesty to collect the $1.6 billion that can be collected for state taxes. According to legislators and Auditor General Jack Wagner, the state estimates to generate $160 million, or 10 percent in collections.
During the past year, New Jersey implemented one of the most successful tax amnesty programs in the nation. It generated more than $700 million in 45 days -- a 250 percent increase in originally projected revenue.
New Jersey's success was due in part to an aggressive outreach campaign that included 600,000 notices sent to taxpayers and a website that allowed individuals to quickly pay their outstanding delinquencies online.
Other outreach initiatives included print, TV, radio and online advertising. Trade organizations sent e-mail blasts to their members. Tax amnesty notices were posted and displayed on digital screens at train stations, on coffee cups in convenience stores, on billboards, buses, and on YouTube.
Since a successful tax amnesty program relies so much on an aggressive, effective outreach campaign, I would recommend that city officials form a Tax Amnesty Committee to provide guidance on how best to maximize collections.
This Committee could be comprised of a representative from the following city departments; Revenue, Finance, Law, City Representative, City Council, and the City Controller's Office. We need to work together if we are to be successful in generating the millions needed to help us fill our anticipated budget gap for next year.
I would urge Council to support and pass Councilwoman Krajewski's tax amnesty legislation to help provide the City with a much needed source of funding to pay for essential city services.
Again, I want to thank Council for the opportunity to testify today before the Committee.
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