Article by Erik Smith. Published on Wednesday, December 01, 2010 EST.

Former Candidate for Congress Wins a Seat at Tax Agency

Gov. Christine Gregoire and new Revenue Director Suzan DelBene

By Erik Smith

Staff writer/ Washington State Wire

OLYMPIA, Dec. 1.—Gov. Christine Gregoire says she has a deal for Washington taxpayers – pay up and all is forgiven.

            The governor is proposing a tax amnesty program, a concept that has been used in virtually every other state but never in Washington. Under the plan, delinquent taxpayers – mainly businesses – would be given a three-month period next year to settle their accounts with the Department of Revenue. All penalties and interest would be waived.

            It’s part of a plan to wring every last drop of tax revenue from Washington as the state hunkers down for what looks like its biggest budget storm ever – a $5.7 billion shortfall that will hit next year.

            “Some taxpayers would say, ‘Why did you give them a break? I get all that,” the governor said. “The fact of the matter is that we need to get everybody to pay, so if this little opportunity gets them out of having to pay penalties and interest and allows us to have the revenue to work through the toughest economic time we’ve seen in years, I’m prepared to make that happen.”

            At the same Tuesday news conference, Gregoire announced the appointment of unsuccessful congressional candidate Suzan DelBene as director of the Department of Revenue. The governor outlined a broad goal of tax-code simplification, and said the department is preparing to hire new auditors to go after out-of-state companies that aren’t paying their fair share of Washington taxes.

            Amnesty Plan is Tried and True

            Tax amnesty might be a new idea in this state but it is hardly a fresh concept. A year ago amnesty was one of the top suggestions of the state auditor’s office in a report that suggested the state might raise millions. It noted that 46 other states had offered tax-amnesty programs since the early 1980s. Over the previous two years, 16 states had raised a total $1.4 billion.

            And some of them have done it more than once. Eight more states, all facing the same crunch as Washington, offered amnesty programs this year, Gregoire said.

            The governor’s plan, as outlined at Tuesday’s news conference, would waive penalties and interest for delinquent taxpayers if they pay their tabs in full between February 1 and May 1 of next year. DOR estimates that it would bring in an additional $24 million by the end of June, from about 10,000 of the estimated 50,000 businesses now considered delinquent.

The plan requires legislative approval.

            Could be Bigger

            Actually, the take could be considerably bigger. The plan as outlined by the governor Tuesday would cover only the Department of Revenue, which accounts for about 60 percent of the delinquent taxes owed to the state. It wouldn’t cover workers’ comp and unemployment insurance taxes, which are collected by other departments and account for the other 40 percent.

            Last year’s state performance audit report noted that the state was owed about $1 billion in delinquent taxes. Another $600 million was considered uncollectible.

            It should be noted that much of that back-tax liability ordinarily is paid as a matter of course, as penalties and interest pile up and businesses settle their old debts before the bills get bigger. But amnesty offers a way for the state to get the money faster – at a time when every penny counts. And it also might shake loose a few bucks from taxpayers who haven’t been paying, and whom the state hasn’t tracked down yet.

            Exactly how much an amnesty plan might raise is really anyone’s guess. Last year’s report from the auditor’s office showed that some states had big expectations and wound up with less than 20 percent of their estimate. Others raked in ten times more than they forecast.

            Appoints DelBene

            Gregoire announced that she is appointing Suzan DelBene to replace Cindi Holmstrom as director of the Department of Revenue. Holmstrom is leaving after five years for a private consulting position.

            DelBene was the Democrat who challenged Congressman Dave Reichert this year, spent more than $2 million of her own money on the campaign, and lost. She helped launch drugstore.com and then went to work for a small technology startup. In 2004 she went to work for Microsoft as a vice president in the mobile division.

            Gregoire said DelBene is a go-getter with plenty to offer. She said she expects DelBene to lead a big push for tax-code simplification. And she deflected speculation that she might be parking DelBene at DOR until she can run for something else.

            “What I wanted and what I saw is a person who has impeccable judgment, good values, good business sense, and who will bring all that at a time when we need to help business be successful and pull out of the recession,” the governor stated.

            DelBene wasn’t closing any doors. “Right now I’m focused on doing this, and what the future holds? I wasn’t expecting to be doing this necessarily three months ago, but I really want to make a difference here and help out as much as I can.”

            Other Plans to Raise Big Bucks

            The governor said she asked the Department of Revenue to come to her with ideas for raising more money – the amnesty program was one. She also said DOR will be hiring six new auditors to fan out over the country for the next five months to look at the books of out-of-state companies doing business in Washington. She also said the department will hire seven new excise tax examiners to investigate tax dodgers here.

            “These three steps will help ensure there is fairness in our system today and bring in millions of dollars of revenues needed for state services and local services like education and public safety,” she said.

            All told, the department hopes to raise $44 million in new state revenue and $6 million for local governments.

            The governor also said she is examining legislation the department has requested for the coming session. It may go farther, Gregoire said. She may propose an expansion of a tax break granted last year to data processing facilities – and which landed a few of them. Or perhaps a renewed effort to expand DOR authority to go after legal accounting practices it views as tax evasion. “It’s back on the table,” the governor said.

            Anything to raise money.


Expectations and reality often don’t match where tax-amnesty programs are concerned. Meaning it’s anyone’s guess how much a Washington-state program might raise. Source: Office of the Washington State Auditor.

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