Tax bills go out, and the deadline to pay property taxes passes. A small, or maybe ridiculously large, percentage of taxpayers don’t pay their bills, and the taxing jurisdictions lose much-needed revenue. But what can the city or county do in order to get that money from taxpayers who don’t pay year in and year out. Not much, says Jennifer Bjorhus of the Star Tribune, who documents problems faced by Minnesota municipalities trying to collect delinquent property taxes.
A common business strategy among real estate developers is to purposely avoid paying property taxes, knowing that fees, penalties and interest will be assessed, in the hope that eventually a buyer will purchase the property and pay off the back taxes, Bjorhus explains. Essentially, these developers are forcing the taxing authorities to act as a sort of lender while they search for potential buyers. Interest, penalties, fees and an eventual sale are the few options most jurisdictions have.
But many jurisdictions have decided to take the Scarlet Letter approach, and hope that the ignominy of being published on a public list of the most delinquent taxpayers in their jurisdiction will be enough to shame taxpayers into settling their bills. And many that publish such lists have gotten creative. Cuyahoga County, Ohio refers to its top property tax delinquents as the “Dirty Dozen.” The dirtiest of the dozen, and several others on the list, are real estate development companies.
Philadelphia takes a pugilist’s approach, including gentle threats from both Mayor Michael Nutter, and local boxing legend and light-heavyweight world champion Bernard “The Executioner” Hopkins. “Pay Your Taxes…Or Else!!!” says Hopkins, looming at the top of the city’s webpage on Delinquent Accounts. “If You Don’t Want the Mayor to Come Callin’, Pay Up,” the page reads a little bit below.
Houston takes a more solemn approach, publishing a list of “Seriously Delinquent Taxpayers,” for city property taxes, and excludes those who are currently challenging their property values with the county appraisal district. Other jurisdictions that publish similar delinquent lists are Maui County, Hawaii, which lists the top 25 delinquents and those that have been delinquent for more than three years, and Shawnee County, Kansas, which had more than 5,800 delinquent parcels totaling more than $8 million in lost revenue.
Sometimes the problem isn’t large real estate developers gaming the system, but simply lots of unhappy residential taxpayers. The Detroit News reported last year that a whopping 47 percent of city residents hadn’t paid their property tax bills for the prior year—many citing poor or nonexistent city services as the reason for withholding payment. There were 77 different blocks where only a single owner paid. All told, the city lost $246 million in property tax revenue, more than one-tenth of its yearly budget, the report notes.
For those unhappy taxpayers, being on a delinquent list might not make them more likely to pay up. But perhaps a visit from Bernhard Hopkins would.
Continue the conversation on Bloomberg BNA’s State Tax Group’s LinkedIn page: Do you think that shaming delinquent taxpayers is an appropriate way to get taxpayers to pay up?
Sign up for a free trial of the Bloomberg BNA Premier State Tax Library and see a detailed discussion on state property taxes.
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