This morning, Kevin Drum has a horror story about a tax lien that seemingly can't be removed from a credit report. Long story short: confusion/error settling father's estate; tax lien incurred/cleared up; tax lien still there, making it hard to get a loan.
But as a reader points out in the comments, it's not quite that simple. A valid tax lien is a credit event. Just as with a bill collection, it doesn't go away merely because you've paid it. The credit reporting agencies merely add the notation that it's been satisfied.
On the other hand, I can attest from personal experience that those smudges have staying power. Through a series of bizarre events including a misfiled state tax return, multi-state residence, and an apparently incorrect address, the state of New York slapped me with a tax lien a few years back. The State of New York has since admitted they were entirely in error, and indeed, that they owed me about $500 in refund.
(Not that they paid. Funnily enough, the statute of limitations for getting a refund from the state is much shorter than their statute of limitations for coming after arrears.)
The judgement has been vacated, the lien rescinded, yet it's still there on my credit report. But the fault, Horatio, lies not in our credit reporting bureaus, but in ourselves. Or rather, our governments.