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• Non-Profit Organization Tax Liens
• Tax Liens Sales Procedures
• Tax Liens Trends
• Risk Analysis - Tax Liens
• Tax Liens and Competing Claims
• Tax Liens and Statute of Limitations
• Discharging a Tax Lien
• Tax Liens - From the Tax Lien Purchaser's Perspective
• Tax Liens - From the Government's Perspective
• Tax Liens - From the Tax Payer's Perspective
• Negative Effect of Tax Liens on 3rd Parties
• Pitfalls of Investing in Tax Liens
• Pitfalls of Tax Lien Sales for Taxation Authorities and Local Government

The Governments Perspective in Regard to Tax Liens

Governments require tax revenue to finance public expenditure, and when taxes are remiss, the entire community suffers. Usually a tax lien will have priority over other liens, and the selling of the right to collection to third parties has been common practice since Ancient Roman times. Sometimes, this zeal for revenue results in social problems and an infrastructure badly in need of maintenance, but in general it is able to foster financial health for the municipality and prevent future delinquency in taxation.

Basis of Property Tax
Negative public sentiment in regard to the property tax, has increased the local government’s reliance of fees, charges and assessments to maintain their public expenditure.

Historically, public resentment stems from inexact methods of tax assessment such as fair market value, which at best is subjective and dynamic, as opposed to the tax itself which proves to rather static.

Federal and State governments receive very little benefit from this tax, but local government relies on it for public expenditure; without it communities suffer from poor social and financial health from poor infrastructure.

When the outstanding tax debt approaches the value of the property, owners can often elect to abandon the property, the local community deteriorates, and often the taxation authority in a tax deed sale will not be able to recover the full amount of the tax debt outstanding.

The sale of tax liens transfers the right of collection to a third party, and provides governments with their much needed funding, and latterly, local governments see delinquent tax as a potential assets rather than an administrative burden. Further, the securitization and parceling of tax liens into bundles that are sold in volumes to large investors, has further engendered a credit crisis, when other holders of a lien against the property such as mortgagees, are unable to be identified.

Long Term Damage in Return for Short Term Funds
The reality of extreme circumstances is that the local government recoups a fraction of its tax dues from an opportunistic investor, but then are left with the possibility that the property will deteriorate and the community is left with vacant land that is unable to be utilized and unable to be repurchased due to the lien and costs incurred mounting to far more than the market value of the property. In return for a small restoration in tax revenue, the local government is now faced with a growing problem that affects the entire jurisdiction, and the prospect that its population will decrease as more and more of its citizens relocate to other areas.

However, the benefits of a local government selling tax liens to third parties cannot be ignored, and in addition to providing resources to fund public expenditure, improve the community’s financial position, and serve as a deterrent to future tax delinquency.

In addition, a centralized Federal government can bring together all the resources of the country in a time of strife, but it is the local government that renews those resources and revitalizes the community.Accordingly, local governments need to be circumspect in regard to their finances, and prudently manage them in an ever evolving financial market of diverse instruments, the increasing municipal claims and tax liens law.

 

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