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A Cautionary Tale on Privatizing Tax Collection

Tuesday, 10 September 2013 13:03 By The Daily Take Team, The Thom Hartmann Program | Op-Ed
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Tax problems(Image: Tax problems via Shutterstock)John Adams once said that, "Government is instituted for the common good; for the protection, safety, prosperity and happiness of the people; and not for the profit, honor, or private interest of any one man, family, or class of men."

Since the founding of our nation, there's always been strong and clear distinctions between public space and private space, and between things that are done by the government and things that are done by businesses and the private sector.

These distinctions are at the very core of our democracy, and of capitalism in America.

For example, capitalism requires an impartial court system that can enforce contracts. Obviously, this court system can't be run by corporations themselves, and is instead run by the government.

Unfortunately, over the past several decades, the lines between public and private, corporations and government have become blurred, as more and more things that have traditionally been part of our commons, and controlled by the government, are being sold off to the highest bidder in an endless wave of privatization.

One of those things is tax collection.

The power of tax collection should always be a power afforded to a government that's answerable to We The People.

It shouldn't be a power that's transferred to private corporations.

But as The Washington Post brilliantly points out, that's exactly what's happened right here in our nation's capital, in an experiment to privatize tax collection. 

And not surprisingly, it's an experiment that's having disastrous effects.

Just ask Bennie Coleman, a 76 year-old veteran who, thanks to D.C.'s tax lien privatization program, had his $197,000 house foreclosed and taken away from him, all because of a $134 property tax bill that hadn't been paid.

Coleman's home was taken away from him as part of the D.C. government's program that uses private investors to help it recover unpaid taxes.

Until recently, the nation's capital placed liens on properties when homeowners failed to pay their tax bill, and then sold the liens off at public auctions to small investors, who would then charge the homeowners interest on their liens on top of the debt already owed, until it was paid back.

But now, D.C.'s tax lien program has been taken over by big-time corporations, which quickly turn minor tax bill debts, like Bennie Coleman's $134 debt, into thousands of dollars of debt, which individuals and families can't pay off, and which inevitably leads to foreclosure and windfall profits for corporations.

Bennie Coleman's initial $134 debt had increased to nearly $5,000 before his home was taken from him.

Corporate investors have bought liens all over Washington, D.C., and charge homeowners thousands in legal fees and other costs, that balloon their existing debts.

Between 2005 and 2012, the District of Columbia sold 13,000 tax liens to corporate investors. Since 2005, tax lien holders have foreclosed on around 200 homes, with 1,200 more waiting in the wings for foreclosure.

Of the nearly 200 homeowners who have lost their properties since 2005, one in three had liens of less than $1,000, dwarfing the value of their actual property.

And, to add insult to injury, many of the homes foreclosed on were taken by corporations whose employees and representatives had already been caught breaking laws in other states to win tax liens.

Yesterday, D.C. mayor Vincent Gray said he would push for emergency legislation to reform the predatory lien practice, and announced that the city would stop selling liens that are under $1,000. 

But, that's too little too late for people like Bennie Coleman, and it's only a temporary fix that does little to address the bigger picture.'

While The Washington Post only talks about the District of Columbia's predatory takeover of tax liens, if the Libertarian dream of privatization of our commons continues to spread unchecked, homeowners all across America will be jammed deeper and deeper into debt as their homes are taken from them.

Bennie Coleman won't just be a cautionary tale; he'll be the new normal.

The commons, particularly functions like tax collection, should belong exclusively to We The People, and not corporate billionaires.

Copyright, Truthout. May not be reprinted without permission of the author.

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