The Huffington Post Report on Tax Liens and Banks May Miss the Point
The Huffington Post is reporting that banks are purchasing tax liens from local governments to collect when people fail to pay their property taxes. Supposedly, the banks charge additional fees and require the homeowner to pay the entire lump-sum up front. This often leads to people having to sell their homes to pay the tax. You can see the entire video below:
The video is puzzling because it is difficult to understand what The Huffington Post is arguing. The easy solution would be to avoid using property taxes as a means to fund local governments; this does not appear to be addressed. Although all taxes have negative consequences, a consumption tax would be preferable to a property tax and would not require a tax lien in the first place.
While those on the Left argue that a consumption tax is inherently regressive, the example that The Huffington Post cites in the video certainly demonstrates that property taxes harm the poor just as easily.
However, if the Left argues in favor of a property tax to fund local governments, isn’t an efficient means of collecting the tax necessary? The reason why local governments sell the tax liens to banks is because they don’t have the necessary funds to enforce the liens. If they wanted more funds to accomplish that goal, they would need to tax people more, which is the problem in the first place. Is it not?
The Huffington Post seems to be concerned about the fees that the banks charge on top of the original tax. Again, this misses the point. The local governments created a tax scheme that was so burdensome on citizens that people could not even pay the tax. Worse yet, the local governments did not have the resources to enforce payment. Therefore, to solve the self-imposed problem, the local government needed to create an incentive for banks to enforce the tax lien by offering them an additional fee. When it is all over, The Huffington Post turns around and blames the banks.
It seems that The Huffington Post missed the point: The government created a mess with an unworkable tax structure that harms the poor, and needs a bailout from the banks to fix their problem. This isn’t the fault of the banks, but the fault of local governments.