Daniel Webster famously observed that, “The power to tax is the power to destroy.” We often see arguments over taxes framed as conflicts between the compassionate and the miserly. If you care about the poor, we are told, you will support higher taxes to provide them with better services. Any cautions about taxation are often dismissed as selfishness, stinginess or even greed.
But who is really victimized when the power to tax is abused or mismanaged? The Washington Post recently ran a series of articles exposing years of extensive incompetence and abuse in the collection of property taxes which put thousands of Washington, DC residents into potential foreclosure for owing as little as $150 in back taxes. According to the Post:
Since 2007, the D.C. Office of Tax and Revenue put nearly 1,900 owners at risk of foreclosure by imposing liens on their properties and then erroneously selling them to investors at public auctions. The sales have stunned property owners across the city — many of them elderly and poor — who have scrambled to attend court hearings and plead with city officials to clear their names.
Many supposed tax debts were a result of errors on the part of the D.C. government: tax notices sent to incorrect addresses, payments credited to the wrong account, and so on. Yet the liens were imposed and sold to investors all the same. One investment company purchased dozens of liens from the D.C. government and then foreclosed on forty properties. These property owners supposedly owed a combined total of $107,000 in taxes, but the company was able to acquire the homes and sell them for $6 million. One 97 year old resident owed less than $1000 in taxes on her house of fifty years. Her home was foreclosed on and sold for nearly a quarter of a million dollars.
Years ago, tax lien auctions were small affairs aimed at getting buyers for vacant or abandoned properties. The rules vary from state to state, but typically the government sells the right to collect back taxes to an investor through either random assignment or a bidding process. That investor then attempts to collect the taxes and plus interest, and failing that, initiates foreclosure proceedings on the home. The state government gets its money right away, and the investor gets his money back plus interest, or a property for a bargain price. It was never intended as a mechanism for the powerful to prey on the poor.
Bishop Harry Jackson is chairman of the High Impact Leadership Coalition and senior pastor of Hope Christian Church in Beltsville, MD, and co-authored, Personal Faith, Public Policy [FrontLine; March 2008] with Tony Perkins, president of the Family Research Council.