The problem of DC’s tax lien sales

This weekend, I came across a developing Washington Post project documenting the sale of properties whose owners owe back taxes and found myself thoroughly disgusted with nearly everything I read. By current statute, the District of Columbia may sell tax liens held against properties for any amount owed to debt collectors, debt collectors who will often pile legal fees, interest charges, and other sundry assessments on top of the original tax owed. According to the article, among the properties foreclosed upon were those “owned free and clear by families for generations.”

Imagine it – you’ve lived some place for decades, had a mortgage, and paid it off on time with no late payments. Then a couple years down the road and for whatever reason, you fall behind on land and property taxes. Your hometown then places a lien against your home for non-payment of taxes and after some time the lien is sold to a private debt collector. From the article, an elderly homeowner with dementia – yeah, it’s that’s disturbing – owed $197 to the District in back taxes. Since the taxpayer did not make remuneration on his taxes, the District sold their interest in the property, the tax lien, to a debt collector. In DC, the tax lien is a superior lien to any, including those placed by financial institutions for first mortgages. The amount owed explodes from the original taxes owed to include fees, legal charges, and interest. In the linked WaPo article, the original $197 owed grew to nearly $5,000. For someone on a limited fixed income, arranging for immediate payment of a $5000 magical mystery debt in order to stay in home is a near impossible feat.

So when the Post announced earlier today that Mayor Gray ordered a moratorium on the program, saying that he was shocked by it and had only just learned of it, I was at once satisfied that steps were being taken to suspend the program and completely struck dumb by the idea that the mayor had only just heard of the program. I can’t necessarily articulate why I’m surprised that the mayor only just now learned of the program. Maybe it’s because he’s been involved as an elected official in District government since 2005 and was, previous to the, a Director of the District’s Department of Human Services. Maybe it’s a little much to expect that someone so actively involved in the community for at least the last two decades was unaware of this program, either from his position as director or from never once hearing from a constituent who had been affected by this program.

Now, to be absolutely and perfectly clear, I do not ever condone evading taxes. Paying taxes is part of the social contract and taxes are the grease oiling the gears of a functioning government within a society. If you owe taxes, pay them. However, the idea that a municipality can sell a lien held against a home to a debt collector who can then make the amount owed increase 25 times is completely repellent. The municipality could and should maintain tax liens in house and assess interest at a reasonable amount on the principal tax balance owed. No additional legal fees. No additional debt collection fees. Reading about a veteran lose his home – a home that was owned free and clear of all other liens – is disheartening at best and blood-boiling at worst. It really depends on how long you let yourself dwell upon the matter. This practice of selling tax liens to “investors” should be made illegal in all states, home rule laws be damned.

-R

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