Monday, October 18, 2010

The Tax Man Cometh (And He's Dressed as a Banker)

As citizens. when we pay our property tax bills we have an expectation that those funds will go to the city, county, or state.  But Huffington Post has an interesting story today detailing how that is not always the case.

It seems that Bank of America, and J.P. Morgan Chase along with the hedge fund Fortress, which is headed by former Fannie Mae CEO Daniel Mudd, are purchasing property tax liens from counties and municipalities.  The companies purchase the liens under affiliated company names and then collect from the property owners using the threat of foreclosure.

Some states allow tax lien collection companies to charge as much as 18% in fees and surcharges to the delinquent homeowner.  These additional fees can make it hard for the homeowner to catch up the taxes when they attempt to pay up.

Since Huffington Post encourages us to re post and share the video, I have attached it here so that you can watch it.


The irony of Bank of America and JP Morgan Chase purchasing tax liens and then pursuing the delinquent homeowner is that both institutions were the beneficiaries of TARP money. After receiving tax dollars to bail themselves out, they are now pursuing individual homeowners for property taxes as well as smaller infractions such as bills for sidewalk cleaning and property maintenance.

Obviously the cities and counties benefit from selling these delinquent tax liens to banks and hedge funds because getting the cash up front helps the local governments to alleviate their cash flow problems.  But homeowners immediately receive threatening letters and bills for legal fees which they may not be able to pay.  And since, according to the video link, the banks and hedge funds are not necessarily set up to receive the delinquent tax funds in payments, if the homeowner is unable to pay the entire amount due,  this may be an opportunity for holding companies to pick up real estate for the amount of the taxes owed plus legal fees.

I believe firmly and strongly in free enterprise and privatization wherever possible.  But privatizing tax collection just does not seem right.  Our tax dollars and any fees and penalties should be going directly to the municipalities we live and work in--not to corporate giants who after receiving tax dollars in the form of bailouts are profiting off of the hard times of the individual citizens.


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