Left with Nothing
washingtonpost.com
washingtonpost.com
I understand if the value of the lien/debt is equal or greater than the value of the house. Otherwise, it's just like the article claims - highway robbery.
Enacted and executed perhaps, but I would be very surprised if lobbyists hired by 'vultures' didn't do the conceiving.
It's no coincidence that this is happening in Washington DC, the backyard of some of the most powerful and effective lobbying firms on earth. The set of laws that allow this insanity are almost certainly the result of lobbying efforts by tax lien buyers. Lobbying rules at the local and state level range from non-existent to very lax. As a result, getting a law or ordinance passed to benefit your company or industry at the local level is a relatively inexpensive and simple affair. People need to monitor laws and ordinances in their local jurisdictions, and speak up when they see things that don't pass the smell test. Otherwise, we'll continue to drown in this type of stuff.
Who owns and works at Heartwood and Aeon Financial? Who are these people at the tax office facilitating the practices?
http://www.ilsos.gov/corporatellc/CorporateLlcController?com...
I'm not quite sure what the HN policy is on personal details, but you can find the individual whose name is on the ownership of Aeon Financial on court documents across the US for tax lien purchases.
It appears this document that appeared in a google search indicates that staff at CapitalSource were trying to separate the tax lien operation from the business by operating under the DBA Aeon Financial: http://www.delaney2012.com/wp-content/uploads/2012/09/09-07-...
Google "capitalsource bank fbo aeon financial" for a wealth of results.
If you think lobbying is the problem, check out the license plate: Taxation without Representation. This is an ironic snipe at the state of affairs for the district. [0] I encourage to read, as those in DC know damn well it is Congress stonewalling on many issues. The Congress still has the right, even after 1973, to overrule decisions made by the municipal government, which did not exist prior to that date! [1]
So, thank your elected officials. When people complain about their misfeasance, ineptitude, and inability to run just about anything, DC is a prime example of how they are incapable to run a city, even by delegation.
[0] https://en.wikipedia.org/wiki/District_of_Columbia_voting_ri... [1] https://en.wikipedia.org/wiki/Washington_dc#Government
That might be part of the problem... they really don't have much local government. Congress holds sway in DC. When I lived in Glover Park I thought it was one of the strangest systems I had ever seen. Never really quite understood it completely.
Living near the district, I'm shocked daily by how nobody seems to care that the corruption is so widespread.
The owner loses $130,000. Don't be surprised if the person buying the house for $71,000 is in on the game too.
Two ways I can think of fixing it - one is offering simple, straightforward hearings in front of a judge with the power to use their own judgement (instead of relying on overly-specific, exploitable laws); the other is to implement some counterbalance punitive fee for wrongly harassing citizens - something that decreases the profit ratio for predators and makes defending people in otherwise unprofitable cases profitable.
Yes, because a single corrupt or idiotic or assholic judge should be able to ruin lives left and right without regard for the law.
> the other is to implement some counterbalance punitive fee for wrongly harassing citizens - something that decreases the profit ratio for predators and makes defending people in otherwise unprofitable cases profitable.
And you have another system to game, another way for the scummy lawyers to beat people over the head to prevent their crimes from being punished.
And yes, any system you make could be gamed, but you could make one that is harder to game than the current one.
Ah yes, the "Let that person solve it" school of fixing major social problems. It works really well right up until it fails really badly: George Washington was, for a while, effectively a dictator in that he could have been President-For-Life long before we came to associate that concept with bad outcomes; sadly, for every Washington who willingly resigns and refuses dictatorial powers, there are multiple leaders who exploit them to the fullest, possibly with good intentions to begin with, but that gets lost on the way to having a syphilitic strongman who eats the flesh of his enemies.
> We already do this with small-claims court I believe and to be honest I'm not sure of the differences between that and a court that would handle a tax lien.
Small-claims courts are, by their very nature, both high-volume and self-limiting: A judge-dominated process is necessary because we can't afford a jury to sit on every case involving piddling small change, and the fact they are limited to piddling small change means the amount of damage a judge can do is extremely limited. It's a trade-off, not a broad social principle.
And regarding small claims courts - the amount of damage a judge can do is directly related to how much a person is worth, just like fines for civil infractions. It can be nearly nothing or it can be life altering.
Anyway, the solution to this particular problem would be fine-limits (like in other states) and things like license-renewal restrictions (like you get for not paying a speeding ticket).
Edit: I suppose if people don't pay property taxes continually you have to sell the house to stop the tax revenue loss. Enforcing market-price restrictions might be difficult as lack of sale persists the problem. Maybe taking equity in the house at market price or something like that could work. Any way you look at it though $145 shouldn't be such a high-pri. Unpaid speeding tickets amount to more than that.
You're the one who advocated that judges be allowed to ignore the law and judge entirely based on their own good judgement. I pointed out that there are few people who even have good enough judgement to abdicate at the right time.
> And regarding small claims courts - the amount of damage a judge can do is directly related to how much a person is worth, just like fines for civil infractions. It can be nearly nothing or it can be life altering.
That's why we have laws and we make judges follow those laws. It ill-serves society to force extremely good judges to follow poorly-thought-out laws, but the losses on that end are more than made up for by forcing the idiot and asshole judges to adhere to laws written by people who aren't explicitly out to screw you over.
A single point of reference argument about people not having good enough judgement to abdicate (which relied on a case of abdication?) isn't a sealed argument that people/judges have bad judgement.
"but the losses on that end are more than made up for by forcing the idiot and asshole judges to adhere to laws written by people who aren't explicitly out to screw you over." Based on what? Why are judges explicitly out to screw you over? And are you joking that judges are more out to screw you over than law makers?
And your argument about idiot and asshole judges out to screw you over is coming from where? If I had to guess I'd say that most judges follow the status quo, a smallish portion can be pricks at times (but within the boundaries of the law), and the ones who truly go out of their way to be exceptional are doing so in the name of civil rights and civil liberties.
Why not just make a law to cap the profits. Home must be sold at fair market price and the rest must be given to the owner.
1. It gives more power to the government and less power to the people.
2. The majority of lawmakers are lawyers - complexity means them more job/business opportunities and significance in society.
It points out this arose from a change in 2001 that occurred because the agency was trying to do LESS work, not more.
"But the work overwhelmed the agency, and in 2001, city leaders made a critical change: They told investors to head directly to court to file a foreclosure case. The move empowered investors to start charging legal fees and court costs — a game changer that allowed them to turn minor delinquencies into insurmountable debts."
In Europe, once you get too incapacitated to take care of your stuff, social security take you in charge. After you die, they repossess your property and sell them to recover their cost. What's left is then given to whoever is supposed to inherit. I am not quite sure what would be acceptable with the more liberal US culture, but profiteering of the weak is certainly not an american value.
Clearly, yes, it has become that. Each day, I become more ashamed of where I live.
Administrative hearings are used in a wide range of situations in the U.S. For example, when applying for federal benefits or under compensation programs. They're not a panacea. As organizations, they tend to become biased towards one side or the other. Good luck getting the Department of Labor to rule your way as an employer. One of the values of lawyers is that they force decision makers to justify their decisions to a sophisticated party, which reduces the tendency towards systematic bias or alternatively arbitrary action.
In the context of foreclosures generally, lawyers protect the lenders' interests. Foreclosure is already heavily stacked against the lender. The homeowner has months or sometimes years and numerous second chances to come up with the delinquent payments. Do we need to make the system even more biased by getting rid of the rules and letting a judge decide based on who has the most heartbreaking reason for not paying what they owe?
Incidentally, this situation also clearly demonstrates why the "loser pays legal expenses" rule is a bad one. When the loser pays, the biggest entity in the litigation has no incentive to reign in its legal expenses. Imagine applying "loser pays" to banks in foreclosure proceedings.
I read the whole article, and I somehow missed that sentence buried in the middle of the story. So Mr. Coleman wasn't "left with nothing" but presumably received something like $65,000 (i.e., $71,000 minus $6,000 or whatever the final legal bill was). Nowhere does the article say exactly what he received in the end.
The way the tax sale works sounds quite unjust and corrupt -- we don't need the reporter to make it even more evil ("left with nothing") by obscuring key facts.
>The Maryland company that took Coleman’s house sold it for $71,000 two months after evicting him. The company was owned by Steven Berman, who was convicted in 2008 in the Maryland bid-rigging case. He declined to comment. The law firm for Berman’s company said it was willing to reduce Coleman’s bill to $3,500 but could not reach him.
What part are you saying I still don't understand? The point I was trying to make is that Mr. Coleman does get some money from the sale, although unjustly much less than the house is worth. But the reporter is obscuring this simple fact.
That's not "obscuring this simple fact", that's stating clearly and unambiguously that your "fact" isn't true. The person you initially responded to was creating an example, based on how liens usually work. The reason the profit margins are so high in this case is that it doesn't work that way.
So the $197,000 was likely the appraised value, with the $71,000 the actual sale value when the predators unloaded it.
But it sounds from the article like the original owner does lose everything, which I hope is so ridiculous as to be untrue, but I can't tell...
EDIT: I wonder if I got downvoted for using Noscript, or what...
The first is that laws that allow this to happen are scandalous. Worst case, particularly for the elderly, is that a lien is placed on the home such that it must be paid when the home is transferred in any way. So what if DC has to wait 10 years for $137 mistakenly not paid? Seriously.
Unless the debt exceeds some nontrivial amount, the county should be restricted from taking any action whatsoever. All this to recover $137? Seriously?
If it does come to foreclosure, it is utterly ridiculous that the "investor" (I prefer "predator") gets to keep the entire sale amount. Fees (that should be capped) may be retained with the rest being returned to the owner. Otherwise this is (or should be) the unlawful seizure of assets.
Secondly, if you are such an "investor" how exactly do you live with yourself as a human being doing this? Seriously. I couldn't sleep at night.
As for the county or state officials that make this possible, how do they live themselves doing this to their constituents?
I'm skeptical of the "lien holder gets the equity" claim because it doesn't work that way outside of DC or in foreclosure generally, so I'd be very surprised it it wasn't a misunderstanding on the part of the author.
This article talks about DC tax lien sales, and doesn't mention keeping equity: http://taxlieninvestingpro.com/category/statebystateguides/d.... It looks like a regular judicial foreclosure.
These foreclosure don't just happen one day. They happen after six months of warnings, letters, phone calls, etc.
If you're prepared to outsource that job and have the private sector do it extremely poorly and with no regulation, thereby effectively raping people of their wealth over a pittance, you should be prepared to pay the consequence for that.
Yes. How much do we spend every year on the disabled, seniors, and veterans between benefits, support systems, etc? What is the marginal cost to extend that support to wiping away under $1000 in property taxes?
How much public support will they require after they evicted from their homes over several hundred dollars and have no where to go? We're just shifting the burden. That's my problem.
I'm not sure I understand. Foreclosure means the lien holder takes title to the property, and the current owner, the one who owes the debt that the lien holder was unable to collect, loses title. Then the lien holder, who now has title to the property, sells it for whatever the market will bear, and pockets the sale price minus whatever costs he has to pay. That effectively means the lien holder gets whatever equity is in the property once he has foreclosed on it and sold it.
This article talks about DC tax lien sales, and doesn't mention keeping equity
Well, of course not, since it only talks about buying the tax lien and foreclosing on it; it doesn't talk about the part where once you've foreclosed, you sell the property and pocket the money.
The article does describe the foreclosure process the same way I did above:
"The District of Columbia statutes require that you file a judicial foreclosure on your lien. This means that your attorney will run title, notice all the parties on title and file a foreclosure action in the court to get a judge to issue a final judgment. Once the judge rules in your favor, you can go to the DC Office of Tax and Revenue, pay any outstanding taxes and bills that may be due, and get issued the tax deed."
So you buy the tax lien, and if the tax isn't paid, you foreclose, you pay off the outstanding taxes and bills, and you get the property. The now former property owner, whom you've just evicted, gets nothing. Then you can sell the property for whatever the market will bear. So who has the equity?
In some rare cases, with underwater mortgages, the lender may be allowed to take title.
I do see plenty of web references that describe foreclosures the way you do, but they all talk specifically about foreclosures when the lien is a mortgage. Does the same process apply when the lien is a tax lien? What information I can find suggests it doesn't--or at least, there seems to be a lot of wiggle room.
Not normally, no. Usually the lien holder gets the value of the lien and the remainder of the sale proceeds go to the owner. If the owner is really "left with nothing" he didn't actually have any equity in the house.
http://www.co.jefferson.tx.us/taxoffice/del_tax_Sale/sale_in...
I agree. The author suggests the owner owned the home free and clear, which I do not think is true. As you noted judicial foreclosures do not occur overnight, a free and clear owner of a $197k house would have plenty of time to: 1. take out a mortgage/HELOC for the $500-$5k tax lien, or 2. more extremely sell the home, pay the lien and walk away with the equity ($192k) before the filing of the foreclosure. Further, there is no judge that would not give such a defendant the time to pursue those options even during the proceeding if in fact the defendant owned the property free and clear.
>Not only did he lose his $197,000 house, but he also was stripped of the equity because tax lien purchasers are entitled to everything, trumping even mortgage companies.
This is from the article, and I think this is where the author could have been a little more forthright, by saying under such foreclosure and subsequent auctions the proceeds go 1st to any government liens, 2nd to mortgage holders based on superiority, and 3rd the remaining equity goes to the owner. Of course other lien holders could be shuffled into the equation (such as construction liens or HOA liens).
Here's what a recently formed lobbying organization, "At Home - The Alliance to Help Owners Maintain Equity", said in a spring 2012 letter:
""
A primary flaw in the current tax sale system results from the District government auctioning homes at tax sales even when property values are exponentially greater than the delinquent taxes (which may be as little as $500). If a homeowner is unable to redeem the home following the tax sale, the homeowner loses his/her home and all of the accumulated equity.
""
Now, the DC Bar Association's Antitrust and Consumer Law section said they agree with this letter and re-emphasized that they saw
""
Major Problems with the District’s Tax Sale System
Loss of Equity Homeowners may lose all of their long built–up equity in a property with the tax sale purchaser enjoying an unjust windfall. There is no incentive in the current process to assure that homeowners receive adequate compensation for the loss of this equity, whether through amounts paid at a tax sale or upon disposition of the property following foreclosure. DC law is more punitive to homeowners in this regard than the law of many other jurisdictions.
""
See http://www.dcbar.org/for_lawyers/sections/antitrust_and_cons... .
The Post ended up covering this as news in May 2012, about a month after this statement came out, http://articles.washingtonpost.com/2012-05-28/local/35455912... .
From that 2012 article:
""
The city’s dual-step collection process, in which the OTR is responsible for auctioning off the lien but the investor who purchases the tax-sale certificate is responsible for the ensuing action, makes for a complicated system.
At the tax sale, a winning bidder assumes the delinquent taxes on the property, any penalties that have accrued and an auction fee. If and when the property owner pays off the taxes, the purchaser is refunded the original sale price plus 1.5 percent per month interest on the tab. If the owner fails to pay up within six months of the sale and the purchaser files a foreclosure suit, the owner must also foot the purchaser’s attorney fees.
""
As far as I can tell this latest September 2013 Post coverage ( http://www.washingtonpost.com/sf/investigative/2013/09/08/th... ) isn't exactly anything new — it's just more stories about the same process continuing to cause trouble for folks with poor legal representation and very little spare money.
From a Legal Times blog post in early 2013 about the DC Council considering tax sale reform legislation ( http://legaltimes.typepad.com/blt/2013/01/dc-council-takes-u... ):
""
During a tax sale, investors bid on tax certificates for delinquent commercial and residential properties. After a six-month waiting period, the investor has another six months to sue the property owner in District of Columbia Superior Court. The property owner can pay the taxes, interest – the city charges 18 percent annual interest – and the investor's attorney fees to redeem their property, or face foreclosure.
An estimated 97 percent of owners redeem their property, so tax sales are viewed less as a way to buy property than as an investment opportunity.
""
So if I understand this correctly, it is indeed being claimed by local community advocates that if a homeowner has an unpaid $50 tax bill that is sold to an investor; and some creative accounting turns that bill into a $5000 bill; and the homeowner cannot find a way to pay the $5000, then the investor gets to sell the house and keep the proceeds. But this only happens for one in thirty tax sales.
If you would like to understand this process further and in particular understand whether the Post's latest reporting matches reality, I recommend you contact the AARP Legal Council for the Elderly — call their hotline at +1 (202) 434-2120 and they'll put you in touch with an expert. Alternately, you could try calling the media relations folks at Crowell & Moring LLP (three phone numbers listed at http://www.crowell.com/Contact ); they provide the mailing address for the "Alliance to Help Homeowners Maintain Equity" folks and would be able to get you in touch with someone who can answer your questions about the process.
This is mindboggling to me.
The reasons are best described in the article below, but in summary, we all pay to defend and enhance your property (by supporting the police, roads, local services, etc). It's fairer for property owners to take a larger share of this burden since they alone get the benefits from it, like the ability to sit in the garden and enjoy the view or the increased value of the property when the government builds a road to it. Land taxes also raise revenue without deterring productive work (unlike, say, income tax).
http://stumblingandmumbling.typepad.com/stumbling_and_mumbli...
To answer your direct question, since property owners are overrepresented (they vote more often and are far more likely to be politicians), yes of course they've tried to get rid of progressive property taxes. eg. This in Nevada:
eg you buy a laptop, you have to pay the government a tax each year to keep it.
Why just apply it to houses? May as well just prohibit people from owning property.
Personally, I think such taxes are a massive disincentive for people to do well. As soon as you have enough money to buy a house, you are penalised for it.
Luckily in the UK, we don't have property tax, although we do have other taxes just as disgusting and unfair - stamp duty, inheritance tax, council tax.
Council tax is the UK property tax. It's a very low-rated and regressive tax, but it's a property tax.
"All personal property situated in the commonwealth is subject to tax, unless specifically exempt by law"
http://www.mass.gov/dor/local-officials/municipal-finance-la...
You were required to declare your chairs and desks and tables, calculators, paper and pens, books, bicycles, cameras and computers, and everything and look up its market value and then pay the usual tax just as if it were real estate. You were required to do it every single year. And it's still the law for property above an exempt amount, but no longer applies to every paperclip like it used to.
That law is crazy, of course. Real estate is a big expensive immovable item that creates limits on the level of corruption and record keeping headaches so it's the best target for property taxation. Maybe really big vehicles like cars and airplanes and boats could be targets, too, if they have a home base, but even then you can see problems.
And finally, Henry George [0] points out that the ideal property tax to promote investment, limit corruption and cheating, allow fair administration, limit any kind of dead-weight loss [1], and generate reasonable revenue would be a tax on land value only. Buildings, improvements, vehicles, and personal property should be exempt and only the land's location, area, and fixed geology/hydrology/soil conditions should matter.
[0] http://en.wikipedia.org/wiki/Georgism [1] http://en.wikipedia.org/wiki/Excess_burden_of_taxation
(To ancitipate an obvious rebuttal: yes, I will admit that inheritance tax has probably put people off the idea of dying.)
Inheritance tax is very unfair. If you are rich enough, you'll plan around it and avoid it. But if you're not rich enough, your kids will not only lose their parents, they'll be sent a bill from the government. Which at best is a tad insensitive.
Add to that the fact that the thresholds for inheritance tax haven't been raised properly, so that someone with a 1 bedroom apartment in London will be subject to inheritance tax, it all seems pretty unfair, and perverse for the government to effectively profit from peoples death.
You know that your entire income isn't taxed at the highest bracket's rate, right? So, for example, the highest bracket is 39.6% for income above $400k. If you make $410k, $10k is taxed at 39.6%, and the rest of your income is taxed at a lower rate.
Why bother trying harder if the government will take half of anything extra you make?
Given a hypothetical luxury good with a price of $500,000 under a current taxation regime, which do you think is more likely in a regime with, say, 50% higher taxes: That the luxury good ceases to be produced, or that its price is lowered to the point where a similar number of people as before could afford it?
To answer your second question is impossible - we don't know the shape of supply and demand curves nor do we know the initial rate of taxes. E.g. if the original taxes had been 1% then it's just going to bump the price a little bit. If the original taxes had been 50% then it ceased to be produced.
But if you want to know the general relation of taxes and supply and demand consider how things are going to progress as you keep raising taxes. Do you seriously believe prices are going to fall as the taxes raise?
What matters is the people who are actually paying the bulk taxes and making investments.
However, I feel that I'm already paying the government FAR more money than I should be, so I'm simply not bothered about trying to make them more money.
For simplicity sake, consider that first 100K are taxed at 10% and next 100K at 20%. If you made 100K your effective tax had been 10% i.e. you owed 10K to the government, however if you made 200K, even though the first 100K is still taxed at the same rate, your effective rate is 15% because you now owe 30K out of 200K.
Numbers vary, but it's definitely fewer than 5% and possibly fewer than 1% of households that need to do anything at all to avoid the estate tax. And these are people who have benefited immensely from services provided by the government (if only the services that keeps people from stealing their wealth!) and are really doing quite alright; adjusting the tax code to make them do even better seems unfair.
Secondly I have never heard of anyone who didn't want to make more money because of their tax bracket. I do not believe this phenomenon exists, and even if it did, it wouldn't strike me as all that much of a problem in a population with unemployment as high as our own.
http://www.hmrc.gov.uk/inheritancetax/intro/basics.htm
You can get around it by 'gifting' things to your kids, as long as you then don't die for 7 years after etc etc.
On your last point, it certainly does exist. What I think happens is people like me don't bother trying so hard, because I'll be damned if I'm going to give the government more money. However, people who are already making much more than me, just hire a good accountant to 'make the problem go away' - eg register offshore companies etc etc
Are you seriously saying, that when the UK government had a higher tax rate of 97% in the 60s/70s, you would have been more than happy to do that extra overtime work, and would have gladly received your 3%??? Crazy
Anything over 49% is slavery, and will end up crippling the country rather than raising more tax revenue. Which is why it was absolutely right and proper that the current government reduced the top rate from 50% to 45%.
* blind investments into endless real estate development projects that have no tenants or structural quality (China, Dubai)
* extremely high prices for anyone entering the real estate market (old European monarchies, where a family might have owned the same real estate for centuries)
* lack of funds for upkeeping and maintaining what's considered a shared property (facades, sidewalks) while maintaining fancy interiors (Eastern Europe)
No. Property tax is primarily a means for localities to raise revenue. If what you were saying were true, then developed land, including primary residences, would have no associated property taxes. It'd be exempt.
Here, generally, personal income taxes are replaced with property, sales, and business (franchise) taxes. You pay taxes, as a person, on your vehicle, real property, and per taxable transaction. But, you do not pay it on your income.
(Note that property owners would NOT take a larger share of the burden; as with council tax, responsibility for payment would fall to tenants, to the greatest extent that market forces will permit. For council tax, that is currently "tenant pays all of it". No reason to assume a land value tax would be different.)
disclosure: I am an ordinary, average, white, property owner, not Amish (Atheist, actually).
The notion that we can be isolated within a nation and refuse to take collective responsibility is a dream that has never had much foundation in reality.
The naivete, here, is of course, that the wealthy don't have more resources to protect themselves against property taxes or reduce their burden, or deal with enforcement, or mitigate corruption by the state.
In reality though, there is no "rules scheme" you can construct that will be as progressive as you want. You'll tack on more rules to tweak it to satisfy your conscience that you're not hurting the poor. The wealthy will hack this and find a loophole, and even if they don't, the burden isn't so terrible for them. Slight infraction by the poor will be come down upon disproportionately by the government (because the cost of enforcement against the poor is lower because of lowered risk of having it fought in the courts) and 'an example must be set'.
Although your property tax was designed to be 'progessive', it instead, wound up being a barrier that is difficult to surmount. It is naive to think that the state will be this hyper-logical ultra-fair machination. It's not, and it never will be.
Instead of socially engineering through the state, everyone would have been far better off if you helped the poor by reaching into your own pocket. But, of course if one is selfish, that's not going to happen - and it's far easier instead to project one's own selfishness onto other people, extrapolate onto all of society and use the state to run your charity for you.
So land tax is fair and progressive (the more land you own, the more tax you pay).
Did you even read the WaPo article? Do you not see how the existence of a property tax has come around to hurt exactly the most vulnerable population (and in this case, through no directed malice) I promise you, people living in Palisades (the richest part of DC) are not worried about property tax liens because they can pay people to deal with paying the taxes (either legally, say hiring an admin, or extralegally). It's not progressive because the bureaucracy and the hammer of the state causes a greater fundamental inconvenience to those of less means than to those of greater means.
As to the hammer, do you think the DC government would have sent "armed US marshals" to recover the house if it were in the Palisades? Why or why not?
Many countries have land taxes which work reasonably well. There can be some proscribed formula (based on a regression on nearby property). Or they can do valuations. There'll always be problems, but it's not more evil than many other taxes (unless they enforce it by stealing property).
Maybe the government will send in SWAT teams to collect unpaid land tax bills from poor people, and a friendly note to rich people; but that's not because it's a land tax. How do you think they treat unpaid parking tickets?
The advantage of taxing the use or consumption of a scare resource (land) instead of income should be obvious. If Bill Gates wants a mansion, he's making it harder for normal people to buy a home. If Bill Gates makes a billion dollars selling some operation system, he's presumably creating jobs, and making a lot of people happy (since they can get on the internet without buying an expensive Mac, or having to figure out how to configure their modem using Linux). (Note - some rich people make their money by being parasites, but capitalism works because this usually isn't the case).
Finally, there's the stabilising effect that a land tax has. Property is a huge investment, driven by unsophisticated retail investors (who may be putting most of their life's savings into a single home), prone to stupid fluctuations, which can destroy the lives of normal people when it does something funny. Taxing it helps keep it a little rational (as the taxes will encourage people to avoid it when it starts heating up).
What happens if they refuse to pay the tax, then? As an agent of the state, how do you make them pay? You might send them some letters with warnings. Of course then they might continue to shirk the law. You can ratchet up the tax, by charging interest. Ok, but that's a number. They still refuse to pay. How do you make them pay?
2. your logic is questionable:
>Property is a huge investment, driven by unsophisticated retail investors (who may be putting most of their life's savings into a single home), prone to stupid fluctuations, which can destroy the lives of normal people when it does something funny. Taxing it helps keep it a little rational (as the taxes will encourage people to avoid it when it starts heating up).
Having children is a huge investment, driven by unsophisticated people, prone to stupid fluctuations, which can destroy the lives of normal people when it does something funny. Taxing childbirth helps keep it a little rational (as the taxes will encourage people to avoid sex when it starts heating up)
Does that sound like reasonable public policy?
And aside from the policy ethics I strongly doubt your model that property taxation is a significant 'tempering agent'. If you're going to call the buyer an 'unsophisticated retail investor', it's unlikely to presume that they will have a 'sophisticated' concept of property taxation, either, especially when the government can change its parameters at will.
Finally, if you're going to argue that property taxation is supposed to be a detterent for people who you are codedly calling 'unsophisticated' (whether or accurate or not, that reads to me as 'poor people') to 'rash' purchases, well, thank you for demonstrating my point that it's tax with regressive outcomes.
If you can show me a citation indicating that property tax keeps housing prices 'rational', I'd give it a second thought.
OK, in extreme circumstances then seizing the land, selling it, then giving any residual (after taxes are paid) back might be necessary. The problem in this thread is, the residual didn't get given back, and it doesn't seem they followed due process.
> Having children is a huge investment, driven by unsophisticated people, prone to stupid fluctuations, which can destroy the lives of normal people when it does something funny
There's no "child bubble", in which people all want to have children when the price of children goes up. I don't follow the analogy. Wait ... you mean it's a financial risk? Good point, maybe children should be taxed, but since having children isn't always voluntary, and there's no way you can stop a person who can't afford the tax from having a kid (at least, no ethical way), then it's' probably not such a great idea.
> And aside from the policy ethics I strongly doubt your model that property taxation is a significant 'tempering agent'.
It just makes sense. As you've asked, I can find some economists who think it's a good idea. Here's some review - http://www.enhr2011.com/sites/default/files/Paper-Haffner%20...
One of the things it cites:
http://search.oecd.org/officialdocuments/displaydocumentpdf/...
Basically, yes a tax on value reduces volatility. Maybe. It's a credible idea, though it would be nice to have some more research. Transaction taxes are not such a great idea. Tax breaks on houses increase volatility.
And it's not a tax with regressive outcomes. Really poor people rent. I'm just saying "unsophisticated" to mean "people who don't trade for a living". Most people who invest in housing aren't professional real estate investors.
For instance, if I had 5 acres in the middle of nowhere, I might be expected to chip in to a fund to keep a fire on my land from spreading to adjacent BLM property. However, my acreage is likely to be taxed more or less based on the quality of the view, or another similarly cosmetic factor in land value. Why not just calculate my share of the public fire suppression expenses based on area? Assuming, of course, that sufficiently many of my neighbors feel compelled to intervene in cases of wildfire.
remember:
> there is no "rules scheme" you can construct that will be as progressive as you want.
What you propose may be 'fair'[0], in the context of providing services*. But that is not the goal of progressivism, which is redistribution of wealth and creation of an more outcomes-equal society (a concept I'm personally not opposed to, if the state doesn't do it).
[0]but even fair in your example isn't quite correct. Because area is not proportional to fire risk. Let's say I live in the valley, where a stream runs through, the vegetation is green, and the area never gets hit by lightning. And my rich neighbors a mile away are on the mesa, which has a great view, but is brown and always dry, and up high, so lightning hits there regularly? Should area be a fair assessor of fire risk? Is it fair to have me subsidize the fire protection of the rich people who live closer to where fires happen? (this is a simplified description of the very real LA county fire system where rich people live out on the hills where there are far more brushfires)
I can think of a few solutions* to your counterexample though, and that's the point. There's no reason to expect a solution to be fair in all cases, or perfectly fair in any. I'd only argue that there is often, or perhaps always, a more equitable and direct way to provide for common services than property taxes.
*I choose the BLM as a neighbor purposefully. The rich people in your example would almost certainly prefer to fund their own municipal utility than settle for the type of response I would expect the state or county to provide.
And the unfairness will always over time become skewed towards the wealthy and powerful (municipal authority:'well obviously we are authorized to make exceptions like X as precedented by our rules system in code ZZZ, subparagraph Q; if we give an advantage to corporation Y by implementing change T, it may not necessarily be in the spirit of total fairness - but we will create jobs! and thus it will be in the public interest'). If fairness is your dominant value, the only perfectly fair and sustainable solution is zero. If progressive redistribution is your dominant value, you will wind up with a lot of difficulty over the 'how much is enough' question, and the implementation will almost always find a way to be anti-progressive.
Would you at least agree that things don't have to be quite so complicated once you get out of the city?
What else could the government do, put the homeowner in debtor's prison?
I'm still curious what myname would propose as an alternative collection scheme. The article mentions that Michigan stopped doing tax lien sales, so I checked up on what they do now: https://www.tax-sale.info/html/index/page/general
SPOILER: > The properties are then sold by deed at auction.
Not much of an improvement over the lien process; just a faster foreclosure.
But of course, with this "new method" it makes sense to be higher.
http://www.nuwireinvestor.com/articles/how-texas-tax-sales-w...
http://www.dallascounty.org/department/pubworks/documents/St...
http://en.wikipedia.org/wiki/Bella_Vista,_Arkansas
First-hand experience.
edit: IRS liens in effect before the sale go with the property, and can delay the new owner in getting a title policy.
Thankfully VA and MD don't recognize this twisted logic.
I understand how it would be hard for the government to implement a policy to do the same, but this situation is ridiculous.
An important part of the article is that the subject profiled had dementia and was thus may not have been able to understand what was going on and was basically taken advantage of, albeit legally.
A 95-year-old church choir leader lost her family home to
a Maryland investor over a tax debt of $44.79 while she
was struggling with Alzheimer’s in a nursing home.
Scary fucking world.
It's not a coincidence that this is happening to mostly elderly people who otherwise own their properties in the clear, people who are often burdened with serious health problems.
There is a simple fix. Require the liens to be paid off when there is a change of ownership. The city knows what it is owed, and that it will get the money eventually. If the city needs the money today, it ought to be able to borrow the funds (not all that different that accounts receivable factoring). Throwing people out of their homes over small amounts is inhumane.
BTW, this is a privatized operation wherein predatory debt collectors buy the liens, foreclose the property, and then flip it at a huge profit. Just another example of government acting as stenographer for the financial industry.
Did you actually just say a sentence with the phrase "government acting" in it as an example of something Ayn Rand would be in favor of? HAHAHAHA....
(I'm not in the Ayn Rand camp, but I think you're missing the basic concept of what she was about.)
"Randian/Thatcherite dream"...as if they want people to lose their houses. You are very misinformed on Objectivist principles.
Yea, that's what process usually entails. I don't see outcome in that list.
Well, property is sacred in Objectivism and "stealing" is a deadly sin. I'll leave it up to you to decide whether taking someone's home over a tiny unpaid tax bill would be considered stealing. (Hint: it is.)
Also, Godwin's law alert!
Do you really expect anyone to engage with you when you call a well-known author a sociopath without justification? Might as well call her a child rapist while you're at it.
For an example, consider an HOA taking a home from someone over unpaid fees.
(Incidentally, if one were looking for a crystal ball into what private/libertarian governance would actually start out looking like in the first world, I'd guess that the problems of HOAs would probably give a pretty good idea.)
Absolute nonsense....I can't think of a single Rand writing that would support this notion in the slightest. One of her primary principles was that the desire for the unearned was a "sin" (or whatever equivalent word she used).
Taking someone's home over a small tax bill is definitely unearned.
If someone who's halfway through paying their mortgage stops making payment, has the bank earned the equity the borrower has put in? You might argue they haven't, but this isn't absurd.
If nothing else, advocates for the lender -- and, in general, libertarian voluntarists -- would argue that if both parties have agreed on the conditions, execution of them is justly earned.
And if you want Rand cite for that, read the Roark/Rand courtroom soliloquy where it's explained why it's OK for him to blow up a building (sure, other people may have put in sweat and equity, but that's nothing compared to his contract).
Well, why not the same thing for an HOA? Nobody held a gun to your head to move into a property that's part of a private collective. If Roark can uphold his aesthetic conditions, surely an HOA can uphold whichever please them, and ask for their fees, and blow you out of your building if you don't comply.
Now, if you think that there's a flaw here -- perhaps that "as agreed" is not necessarily the same thing as "earned" -- I might agree with you. Perhaps Rand even says something to that effect elsewhere. But at the same time, the entire climax of her second most famous book turns on a different principle.
(Also -- I have my doubts that anybody has any true claim to have earned most of what they have. We all have a heck of a free ride as far as life and resources go.)
Exactly, and that's the difference. Nobody held a gun to you head to move into the HOA collective. You knew the terms and consented to them when you moved in. Conversely, you are held to the laws of the state by the force of, ultimately, guns.
It's pretty logically and mathematically definitive, only in present society with bankers gone wild could it be terribly questionable who owns what. Common sense is usually sufficient.
> And if you want Rand cite for that, read the Roark/Rand courtroom soliloquy where it's explained why it's OK for him to blow up a building (sure, other people may have put in sweat and equity, but that's nothing compared to his contract).
Honestly, it's been ages since I've read that book so I can't comment intelligently. That sounds pretty crazy, but I have a feeling you're taking a negative interpretation, although I may be wrong. I tend to find Rand's larger principles correct, if not practical, while I differ on some of the smaller ones (Food Safety / restaurant inspections come to mind).
I could see it if MAYBE the HOA had that as part of a written agreement consented to the homeowner at the time of home puchrase. Of course, that's exactly not how government works.
If you work at a major investment bank, why would you speak out against government regulation of your industry when you might need a bailout some year in the future?
If you work at a government regulator (e.g. the SEC), why would you regulate the industry too hard when they are going to be your biggest source of consulting fees after you leave your government employment?
For example, Bernie Madoff's brother was a director of SIFMA (Securities Industry and Financial Markets Association) for two years.
I'm only familiar with the tax sale rules in one Connecticut town, but the include a provision for the (delinquent) taxpayer to pay their bill in full within 30 days of the auction to cancel the sale / lien.
This story is about the fact that this man had no one. No one to make sure is ok. No one to ask if has been forgetting things lately. No neighbors that might have checked in on him. No family that was attentive enough to realise he may need help with the 10 giant boxes of mail by the door. No one that gave enough of a shit to just ask how he was doing.
When was the last time you checked in on that elderly lady that lives next door to make sure she is doing ok? When is the last time you did a little checking up on your elderly family? When was the last time you took the time to make sure the people around you are not getting to the point where they need help?
As a side note, please read the entire article.
Written by Michael Sallah, Debbie Cenziper, Steven Rich / Graphics by Ted Mellnik, Emily Chow, Laura Stanton / Photos by Michael S. Williamson / Editing by Jeff Leen, Steven Kress / Research by Jennifer Jenkins / Production by Chris George, Connor Jennings, Bronwen Latimer, Michelle Williams, Tim Wong
Edit: clarity
But researched articles like this are expensive to produce. That's why PR firms are so successful. Reporters need others to find and research stories for them.
In print, production is the act of taking the raw inputs (copy, graphics, layout) and getting it out the door. E.g., the print production managers I know manage the physical details of the print medium. There is a similar meaning in advertising. [1]
Looking at the resumes of the first couple producers, one's a designer, the other lists himself as "Nerd". So I think they are using the meaning from publishing: people who produce the final product.
[1] http://en.wikipedia.org/wiki/Advertising_agency#Production
I hope papers start providing full 'Credits' to what goes into a piece so as to better inform the reader how many people in the chain it takes to arrive at the final copy.
Look, I understand you believe in the idea, but the harsh reality is that you are being tricked into obedience by your rulers/owners. My country is no different. The standards of living may be lower, but the fact remains: no government ever truly cares about its citizens. It's nice to think they do, though. But look at the incentives. There are none.
Special interest groups are citizens teaming up to push their agenda, those are people who elected you. Special interest groups are not inherently bad nor are they automatically against the will of the electorate. Many are actually representing the electorate.
> Instead, think about this: why do you need some people sitting in a pathetic building ruling over you? Why do you think society cannot do without them and what is it that only governments can do, but people and companies can't?
There you go again treating government and people as if they're different things. You're presenting a false choice, it's not government rule vs freedom from it, it's government rule vs local warlord rule. Power abhors a vacuum and government is our solution to that problem, it's how we live civilly together. It's not nor will it ever be perfect as no human system is, but it's vastly preferable to the alternative.
The idea that people can live peacefully without a form of government is just silly, someone has to enforce rule of law and it can't be someone's private security force or the guy with the most goons wins every time. Either the people choose a government or someone will choose one for them, or decide to rule himself.
Regarding your particular questions, in May 2003, 79% of Americans thought the Iraq war was justified, so the majority clearly didn't oppose it. Most now believe it was a mistake. Only 41% of citizens agree with the president's plan to close Guantanamo. A majority of Americans think the TSA is doing a good job. I think the majority of Americans are wrong on all of these things, but they are undeniably popular opinions.
I, personally, am not being robbed. I am also not being tricked into obedience. Your insistence to the contrary, entirely ignorant of my actual situation, is arrogant foolishness. I've lived on four continents, and I'm quite happy with what I have here.
Could it be better? Sure. Is it at risk from powerful interests? Definitely, especially at the federal level. But I also see many causes for hope.
But if people want to enjoy the benefits of living in a city, state, and country, to participate in an economy, those benefits come with obligations. Sure, they may not want to pay for things. But if they can't get others to agree that the government should not do those things, or at least should run them on a cost-recovery basis, then it's too bad.
They certainly have the freedom to move to someplace without effective government. E.g., Waziristan or Somalia. They will be much freer there. Of course, warlords will be free to rob or kill them, so it may not be entirely to their tastes, but then, we aren't guaranteed perfect choices, just the opportunity to make better ones.
All that said, as mentioned above I do agree with you, because assuming banks are keeping homes off the market this only artificially keeps home prices stable, and many of those REOs are failing into disrepair. In my opinion it is better to have ownership and people in homes, even at a short term cost of flooding the market with under valued homes. After all it is the banks who originally to the risk on these loans they foreclosed on and they lost.
My father and step-mother both are mortgage underwriters. One is currently still underwriting, the other is currently working for the GSEs (Fannie and Freddie) forcing several large banks to eat the shitty mortgages they pushed on them.
I can not even begin to tell you how poorly managed these large servicers are. But heh, keep on thinking they know what they're doing. If they service your mortgage, I encourage you to keep a very careful on your note.
The lien holder would then have sent notices and warnings that the debt needed to be paid. Eventually after no response, it filed foreclosure proceedings in the court (at some significant cost). At that point, the son decided to pay the original tax bill, however the holder of the lien presumably wanted its legal costs paid before it would surrender the lien.
What happened next was very unjust. But would make more sense if the article was clear on the timeline of events.
But seriously, things like this are why we must not get too carried away focusing only on market opportunity. Some ideas are profitable, but socially disruptive. In this case, public policy is enabling predatory with very obviously antisocial results, but I think there are plenty of cases where the government isn't so directly involved and the results aren't so obviously destructive, yet antisocial, nonetheless. This is really addressed to the small but vocal minority that seems infatuated with profit-seeking, without concern for anything else.
Example: Small town with "speed trap" (not a for profit business) gives out excess tickets to raise money.
>you have to pay $5000
>you lose $197,000
How is this acceptable?
Why does that section of the 14th amendment not apply?
Straight from the article:
* Homeowners receive several warnings before their liens are put up at annual auctions.
* Once a lien is sold, owners have six months to repay the investor with interest. If that does not happen, the investor can move to foreclose.
The article even mentions the families getting their day in court over the post-tax-sale foreclosure.
I just realized I'm serial rage-replying on this article. You know that annoyed feeling you get when the news covers a subject you're familiar with? Well.
Agree with you, can't see anything wrong going on here too. (i'll state the obvious: i'm joking).
It's not simply a case that here we talk about: - People with dementia or major problems - Lonely - Most of the times, old enough to be completely invisible
And the state, private contractors and greedy individuals use them to refill their bank accounts. And it's perfectly legal. And some people, as you are doing now, simply try to justify it.
I'll tell you what is fair here: - He doesn't pay - Warnings should be issued - He should be given a greater amount to pay (i guess 100x the original amount should be enough) - He still doesn't pay - Insitutions try to understand why this person isn't paying - Take appropriate actions according to the situation. If the lack is anyhow justified (eg. person incapable of self-support) simply drop it and warn social services. Otherwise proceed to court.
Seems a lot more reasonable. But ehi, this would mean lot of effort. Why not just raping and looting the weaks. Keep up with the great job!
How does a city like NY or LA scale this, when 1 or 2 out of hundreds or thousands is this type of situation. This situation only happens because a city doesn't have the manpower to do a social viability check on every tax lien.
I agree on principle, but the monitoring of elderly is not the role of government, but of community, neighbors, and family.
what i got from the article is this: due to the financial situation of the owner, a small unpaid tax turns due to unfair practizes into a larger debt of like $5000, which then allowed a judge to enforce the sale of the house so that unpaid taxes could be paid off.
now if the house was sold for the mentioned 197'000, does that mean that the owner at least got the proceeds minus the debt? the title suggests that this would not be the case...
1) Owner of the house owes a minor amount of taxes. In most of the anecdotes, the homeowners have either no mortgage at all, or otherwise have mostly equity (tiny % of the total value of the home owed). 2) Since the city technically has a lien on the home (or gets one?), they are able to then sell the lien to an "investor", who pays whatever the tax bill is. 3) The investor demands payment, and begins charging huge fees. 4) After 6 months or whatever, the investor forecloses on the house, which is essentially taking ownership (basically a "repossession") 5) The investor sells the house for market value, or whatever price they want. 6) Since the investor is NOT a mortgage company or otherwise holding a mortgage lien, but is holding a lien originated by municipal entity, there is no rule in place that says they need to pay the original homeowner the profit. Therefore, they keep all of the money, minus the tax bill they paid at the start.
In the end, the article implies that this company is buying liens for as low as $50, and then selling the houses out from under the homeowners for hundreds of thousands of dollars.
At least, that's what I understood.
I think when people seek money they should ask themselves if what they are doing has any bit 'unethicalness'.. But who knows if those investors knew of the stories that made their investments possible.
We have the concept of a carbon footprint - what about an ethical footprint?
And if they were, the government would just make Google drive the car to an impound or something, probably, and they'd take that as well.
Google car expense is overplayed. In mass production and with competition the cost would go way down.
Also, if the government makes the 'homeless' drive to specific places out in the desert or something, that's better than the current situation where you're exposed to other homeless and dangerous people.
I actually wouldn't mind going 'homeless' for a while to save money on rent, but currently it's really dangerous to do so. Moving to low rent places is also usually more 'dangerous', especially with children. With a driverless car you can just take your family out into the desert or forest and pretend you're camping.
The current system of full-time rv-ing is quite hard because of parking restrictions and because sending kids off too school and getting groceries from out of town is hard, and because the rv's are too small. With self-driving rv's you can have a few of them to space out in.
But what if they're driving all of the homeless people out to the same spot in the desert? Cars, sure, are better than nothing but better still are cars the government can't use to expel or trap undesirables.
I'm sorry, but the idea of self-driving cars just creep me out.
Basically everything you read about on the news is what almost never happens.
Like they can't just foreclose a house without government approval. Why does the court approve the foreclosure in the first place over such a small debt?
"When it was over, six companies had swept the bidding, snaring two-thirds of the liens, which totaled $5 million, on properties worth more than $666 million"
WTF is wrong with you America?
However, this sort of behavior makes that "silly" libertarian smear appear to be, in fact, entirely spot-on. All of this, the extreme pursuit of small debts, the tacking-on of "legal fees" to skirt usury/extortion laws, and the transfer of debt to more vicious investors (who are more likely to engage in usury, extortion, et al) is textbook mob shit.
What is the scope of the problem here?
Ok:
"Others weren’t as lucky. Tax lien purchasers have foreclosed on nearly 200 houses since 2005 and are now pressing to take 1,200 more, many owned free and clear by families for generations."
Out of home many?
"The retired Marine sergeant lost his house "
Obligatory "and he was a good guy who fought for his country" added in for extra emotion (in addition the picture of course of a respectable citizen).
All this is sad and most certainly an interesting read. But it seems more suite for Taibbi in Rolling Stone.
Would be nice if in addition to writing emotional appeals they enlisted the help of someone (say a think tank) that could do further analysis and come up with some suggestions as far as reform that are backed up by research and in writing.
[1] Noting that this dates back to 2006 and yes if you ignore simple notices bad things happen. Don't pay your insurance bill? You won't have insurance if there is a fire. Etc.
Let's take the best possible return, say 20% annual return, and let's say he owed this for 10 years, then at best, he'd owe $848. I don't see how a firm purchasing a $134 debt from the state can justify such a huge penalty/return.
As an aside as someone who has gone through significant pain trying to collect money from people that owe varying amounts (over the years) it's a process that given a bigger stick (not "ordinary" penalties) would go a long way.
Noting also that this played out over many years. He didn't just miss a payment of $134 and boom someone profits $5000 or $197,000.
Not so. The article states the liens can be sold after a year and foreclosure initiated after an additional 6 months. In several of the cases listed, the original home owner was in hospice care or otherwise unavailable.
I don't disagree that the city needs a way to recoup unpaid taxes. But, there has to be a better way than this.
The number of people this is happening to and (one third of them over a bill less than $1,000) suggest that something about the process is screwed up.
What is the time period that that happens though? Isn't that an important factor in all of this? Plays out over years? How many chances (and over what time period) could the homeowner have been able to rectify for a more reasonable amount of money?
Not disagreeing with your main point or that the punishment not fitting the crime (or opportunists) etc.
I guess I have a wider problem with this "problem".
The fact is there aren't really people out there (other than some community activists) who have a brain and can help people like this to navigate the system without charging the rates that attorney's charge. Which seems to be the answer to anyone's problem. Get an attorney to tell you your rights and write a letter so people take you seriously. This is in a sense one of the reasons that poor and/or uneducated people get shafted so often. They have no way to communicate and people don't take their problems as seriously to boot.
Of course even if you created an office of "ombudsmen to the normally shafted" that office might simply drown with those that weren't deserving and simply wanted to take advantage of any thing they could to dodge legal process.
That's why the examples are all of people who were absent or had medical problems - because there are multiple opportunities to correct the problem.
It sounds like it's basically an oversight, but nobody in government has bothered to fix it because the people affected are predominantly poor and black.
and
Chapter 3 - Verse 130: http://www.usc.edu/org/cmje/religious-texts/quran/verses/003...
"O you who believe! Devour not usury (interest), doubled and multiplied; but fear Allah (God); that you may (really) prosper."
Some more quotes: http://www.answering-christianity.com/yahya_ahmed/riba.htm
Allah (God) has declared war on those who take interest: http://www.hilalplaza.com/islam/Interest.html
a) growth isn't required in all economic models so inflation isn't necessarily valid.
b) goods and services are perfectly good interest. Not that you'd have to borrow it if interest wasn't profitable (it would drive asset value down).
c) risk is irrelevant if lending isn't required.
you're too in the bank and growth model mindset. It doesn't work like that everywhere.