The New York Times has an interesting article today about a practice that is more common than most people probably thought. Local governments have been selling back-tax assets to third-party collection agencies. The article portrays this as mostly a bad thing, because these collection agencies are more aggressive than governments would be. I think the only real problem this article uncovers is that the government is vastly inferior to private collectors at getting what it's owed.
First, here's the problem, according to the Times:
But housing advocates say the private companies may be exacerbating the foreclosure crisis, pushing out homeowners faster than would governments, which are increasingly concerned about neighborhoods becoming wastelands of abandoned properties.
But then it, thankfully, explains the alternative view:
Investors say the arrangement actually benefits everyone. School districts, fire departments and public parks get an infusion of cash. The investors take on a risky but potentially high-yielding investment. And taxpayers do not have to pick up the slack from scofflaw landlords or tax evaders.
Can I get an "Amen!"? If we've learned anything from this credit-driven recession, it's that people ought to pay their bills. If they don't, bad things will happen. The idea that it's good for the government to go easy on collecting back taxes, or would be less aggressive than a private collector, undermines the very idea that paying your taxes is the same as paying any other expense. It should be.
I'll be the first to complain about paying too much in taxes. But I'll also be the first to say that responsible citizens need to pay what they owe Uncle Sam, just like what they owe Nissan or Chase. If Americans don't learn to be more financially responsible as a result of this recession, then they never will. Sadly, I fear that outcome. But federal, state and local governments should help to reinforce this lesson by more aggressively pursuing the taxes they are owed.