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Left with Nothing (washingtonpost.com)
460 points by aviziva on Sept 8, 2013 | hide | past | web | favorite | 280 comments



Tax enforcement schemes are conceived, enacted, and executed by governments because they have a monopoly over the taxing power. If private profiteers are allowed to exploit local citizens, it is strictly because the entity holding that power has deliberately chosen to set up an enforcement scheme that arms those predators with everything they need to conduct their exploitation. The vultures, despicable as they are, would be powerless to do anything to delinquent but for being armed for the task by the enabling government. Is this abusive? Yes, it is massively abusive. But the remedy needs to go to the source of the abuse and that source is a faceless, uncaring local government that has elevated cost-savings over fairness and, when caught as it has been here, is trying to pretend that it can impose a few regulations at the edges to solve the problem. The real solution is to bring the enforcement back in-house where it historically resided and then collection procedures can be controlled and made fair to citizens. But, of course, that would vitiate the cost savings to the governmental entity from which it benefits under its current system. It should do it but don't hold your breath waiting for reform. It is much easier to blame the outside vultures (who are of course eminently blameworthy), impose a few patches to pretend to deal with the abuse, and go on with business as usual. Whichever way reform is done, if it is at all, one can only hope that it will be real and meaningful but I suspect it will not. Very sad to see the tragic consequences.


Exactly. There is an unending supply of vultures, as you describe them, to take advantage of these situations. The only real solution is for the government to stop staking people out in the sun for the sake of modest savings.


>Tax enforcement schemes are conceived, enacted, and executed by governments because they have a monopoly over the taxing power.

Enacted and executed perhaps, but I would be very surprised if lobbyists hired by 'vultures' didn't do the conceiving.


i don't get why the law is so coarse - why a lien worth less than the value of the house can be used to forclose the house?!

I understand if the value of the lien/debt is equal or greater than the value of the house. Otherwise, it's just like the article claims - highway robbery.


Any lien can be used to foreclose on property if the lien holder has no other way to force the owner to pay. Generally, the owner is entitled to whatever sales proceeds they have left after paying the lien.


I'm all for making money, but this seems predatory and downright evil. Under no circumstances should someone be able to foreclose on a property because they hold a lien for less than 1/1000th of the value of the property, then take all of the equity. According to the article, this is only allowed in a small handful of jurisdictions - most require the proceeds above the amount owed to be passed along to the owner.

It's no coincidence that this is happening in Washington DC, the backyard of some of the most powerful and effective lobbying firms on earth. The set of laws that allow this insanity are almost certainly the result of lobbying efforts by tax lien buyers. Lobbying rules at the local and state level range from non-existent to very lax. As a result, getting a law or ordinance passed to benefit your company or industry at the local level is a relatively inexpensive and simple affair. People need to monitor laws and ordinances in their local jurisdictions, and speak up when they see things that don't pass the smell test. Otherwise, we'll continue to drown in this type of stuff.


I will expand on that comment. DC is a mess because its municipal government is very much restricted, and the final say is in the hands of Congress.

If you think lobbying is the problem, check out the license plate: Taxation without Representation. This is an ironic snipe at the state of affairs for the district. [0] I encourage to read, as those in DC know damn well it is Congress stonewalling on many issues. The Congress still has the right, even after 1973, to overrule decisions made by the municipal government, which did not exist prior to that date! [1]

So, thank your elected officials. When people complain about their misfeasance, ineptitude, and inability to run just about anything, DC is a prime example of how they are incapable to run a city, even by delegation.

[0] https://en.wikipedia.org/wiki/District_of_Columbia_voting_ri... [1] https://en.wikipedia.org/wiki/Washington_dc#Government


Read that article just makes me angry. Who the hell makes a living doing this, and still sleep at night? They must be sociopaths


You hit in the math correctly. Small fractions of home values should not be sent to the vultures. That said, I don't blame the vultures as much as I blame the politicians who sold out their citizens. It can take years for a bank to kick someone out of their house for a much bigger default. The politicians empower criminals to do more for much worse.


I would like to know the names and a little background on the people involved in these practices. Why doesn't the article name names?

Who owns and works at Heartwood and Aeon Financial? Who are these people at the tax office facilitating the practices?


Aeon Financial, LLC, aka CapitalSource Bank

http://www.ilsos.gov/corporatellc/CorporateLlcController?com...

I'm not quite sure what the HN policy is on personal details, but you can find the individual whose name is on the ownership of Aeon Financial on court documents across the US for tax lien purchases.

It appears this document that appeared in a google search indicates that staff at CapitalSource were trying to separate the tax lien operation from the business by operating under the DBA Aeon Financial: http://www.delaney2012.com/wp-content/uploads/2012/09/09-07-...

Google "capitalsource bank fbo aeon financial" for a wealth of results.


The logical outcome of this kind of predatory practice should be that the "investor" (the purchaser of the liens) gets $5000 out of the $197,000 sale, and the debtor gets $192,000. And even that seem predatory, never mind getting all the equity and forcing the person out of their place of residence.


when someone gets your $197,000 house for $134, they can sell it for $71,000 and take $6000 in legal fees, interest etc, as documented in the article.

The owner loses $130,000. Don't be surprised if the person buying the house for $71,000 is in on the game too.


This problem is indicative of how screwed up our legal system is. Lawyers harass regular folks at-will as most people have no recourse (i.e. money to hire their own lawyer, or knowledge of the expanding and complicated laws).

Two ways I can think of fixing it - one is offering simple, straightforward hearings in front of a judge with the power to use their own judgement (instead of relying on overly-specific, exploitable laws); the other is to implement some counterbalance punitive fee for wrongly harassing citizens - something that decreases the profit ratio for predators and makes defending people in otherwise unprofitable cases profitable.


What do you think was happening in the months and months before the lien sale happened? There were a million opportunities to avoid the whole process through a straightforward administrative process, no lawyers involved.


That assumes you are still capable to follow that process. Apparently the current procedure does not take your present circumstances into account. (like mild dementia, alzeihmer, nursing home example in the article)

In Europe, once you get too incapacitated to take care of your stuff, social security take you in charge. After you die, they repossess your property and sell them to recover their cost. What's left is then given to whoever is supposed to inherit. I am not quite sure what would be acceptable with the more liberal US culture, but profiteering of the weak is certainly not an american value.


>but profiteering of the weak is certainly not an american value.

Clearly, yes, it has become that. Each day, I become more ashamed of where I live.


> Two ways I can think of fixing it - one is offering simple, straightforward hearings in front of a judge with the power to use their own judgement (instead of relying on overly-specific, exploitable laws)

Administrative hearings are used in a wide range of situations in the U.S. For example, when applying for federal benefits or under compensation programs. They're not a panacea. As organizations, they tend to become biased towards one side or the other. Good luck getting the Department of Labor to rule your way as an employer. One of the values of lawyers is that they force decision makers to justify their decisions to a sophisticated party, which reduces the tendency towards systematic bias or alternatively arbitrary action.

In the context of foreclosures generally, lawyers protect the lenders' interests. Foreclosure is already heavily stacked against the lender. The homeowner has months or sometimes years and numerous second chances to come up with the delinquent payments. Do we need to make the system even more biased by getting rid of the rules and letting a judge decide based on who has the most heartbreaking reason for not paying what they owe?

Incidentally, this situation also clearly demonstrates why the "loser pays legal expenses" rule is a bad one. When the loser pays, the biggest entity in the litigation has no incentive to reign in its legal expenses. Imagine applying "loser pays" to banks in foreclosure proceedings.


The complexity of the laws is not a coincidence:

1. It gives more power to the government and less power to the people.

2. The majority of lawmakers are lawyers - complexity means them more job/business opportunities and significance in society.


Did you even read the article?

It points out this arose from a change in 2001 that occurred because the agency was trying to do LESS work, not more.

"But the work overwhelmed the agency, and in 2001, city leaders made a critical change: They told investors to head directly to court to file a foreclosure case. The move empowered investors to start charging legal fees and court costs — a game changer that allowed them to turn minor delinquencies into insurmountable debts."


Law is ripe for disruption. We need something like IBM's Watson to fight the complexity.


No, that won't help. When accountants got electronic spreadsheets, the complexity of accounting laws rised 50 fold.


Motive alone does not a case make.


> a judge with the power to use their own judgement (instead of relying on overly-specific, exploitable laws);

Yes, because a single corrupt or idiotic or assholic judge should be able to ruin lives left and right without regard for the law.

> the other is to implement some counterbalance punitive fee for wrongly harassing citizens - something that decreases the profit ratio for predators and makes defending people in otherwise unprofitable cases profitable.

And you have another system to game, another way for the scummy lawyers to beat people over the head to prevent their crimes from being punished.


I'd rather take my chances with a judge than nearly guaranteeing failure in the current system. We already do this with small-claims court I believe and to be honest I'm not sure of the differences between that and a court that would handle a tax lien.

And yes, any system you make could be gamed, but you could make one that is harder to game than the current one.


It won't help much. Judge elections and appointments will then just be the focus of lobby groups. Watch the movie Hot Coffee to see how state supreme court judge elections are manipulated by business interests to install "friendly" judges.

Why not just make a law to cap the profits. Home must be sold at fair market price and the rest must be given to the owner.


> I'd rather take my chances with a judge than nearly guaranteeing failure in the current system.

Ah yes, the "Let that person solve it" school of fixing major social problems. It works really well right up until it fails really badly: George Washington was, for a while, effectively a dictator in that he could have been President-For-Life long before we came to associate that concept with bad outcomes; sadly, for every Washington who willingly resigns and refuses dictatorial powers, there are multiple leaders who exploit them to the fullest, possibly with good intentions to begin with, but that gets lost on the way to having a syphilitic strongman who eats the flesh of his enemies.

> We already do this with small-claims court I believe and to be honest I'm not sure of the differences between that and a court that would handle a tax lien.

Small-claims courts are, by their very nature, both high-volume and self-limiting: A judge-dominated process is necessary because we can't afford a jury to sit on every case involving piddling small change, and the fact they are limited to piddling small change means the amount of damage a judge can do is extremely limited. It's a trade-off, not a broad social principle.


A small-claims judge also can't just make shit up. The judge generally has to rely on precedent and law and uses his/her own judgement in areas where discretion does make sense.


You're argument that entrusting certain officials with making good publicly known decisions "works really well right up until it fails really badly" based off of a weird GW parable has me scratching my head.

And regarding small claims courts - the amount of damage a judge can do is directly related to how much a person is worth, just like fines for civil infractions. It can be nearly nothing or it can be life altering.

Anyway, the solution to this particular problem would be fine-limits (like in other states) and things like license-renewal restrictions (like you get for not paying a speeding ticket).

Edit: I suppose if people don't pay property taxes continually you have to sell the house to stop the tax revenue loss. Enforcing market-price restrictions might be difficult as lack of sale persists the problem. Maybe taking equity in the house at market price or something like that could work. Any way you look at it though $145 shouldn't be such a high-pri. Unpaid speeding tickets amount to more than that.


> You're argument that entrusting certain officials with making good publicly known decisions "works really well right up until it fails really badly" based off of a weird GW parable has me scratching my head.

You're the one who advocated that judges be allowed to ignore the law and judge entirely based on their own good judgement. I pointed out that there are few people who even have good enough judgement to abdicate at the right time.

> And regarding small claims courts - the amount of damage a judge can do is directly related to how much a person is worth, just like fines for civil infractions. It can be nearly nothing or it can be life altering.

That's why we have laws and we make judges follow those laws. It ill-serves society to force extremely good judges to follow poorly-thought-out laws, but the losses on that end are more than made up for by forcing the idiot and asshole judges to adhere to laws written by people who aren't explicitly out to screw you over.


I never said they should be able to ignore the law and judge entirely based on their own good judgement.

A single point of reference argument about people not having good enough judgement to abdicate (which relied on a case of abdication?) isn't a sealed argument that people/judges have bad judgement.

"but the losses on that end are more than made up for by forcing the idiot and asshole judges to adhere to laws written by people who aren't explicitly out to screw you over." Based on what? Why are judges explicitly out to screw you over? And are you joking that judges are more out to screw you over than law makers?

And your argument about idiot and asshole judges out to screw you over is coming from where? If I had to guess I'd say that most judges follow the status quo, a smallish portion can be pricks at times (but within the boundaries of the law), and the ones who truly go out of their way to be exceptional are doing so in the name of civil rights and civil liberties.


Your two-sentence summary is better than the entire article in understanding what's going on.

I read the whole article, and I somehow missed that sentence buried in the middle of the story. So Mr. Coleman wasn't "left with nothing" but presumably received something like $65,000 (i.e., $71,000 minus $6,000 or whatever the final legal bill was). Nowhere does the article say exactly what he received in the end.

The way the tax sale works sounds quite unjust and corrupt -- we don't need the reporter to make it even more evil ("left with nothing") by obscuring key facts.


No, that's not what happened at all. Try reading again.

>The Maryland company that took Coleman’s house sold it for $71,000 two months after evicting him. The company was owned by Steven Berman, who was convicted in 2008 in the Maryland bid-rigging case. He declined to comment. The law firm for Berman’s company said it was willing to reduce Coleman’s bill to $3,500 but could not reach him.


> No, that's not what happened at all.

What part are you saying I still don't understand? The point I was trying to make is that Mr. Coleman does get some money from the sale, although unjustly much less than the house is worth. But the reporter is obscuring this simple fact.


> Not only did he lose his $197,000 house, but he also was stripped of the equity because tax lien purchasers are entitled to everything, trumping even mortgage companies.

That's not "obscuring this simple fact", that's stating clearly and unambiguously that your "fact" isn't true. The person you initially responded to was creating an example, based on how liens usually work. The reason the profit margins are so high in this case is that it doesn't work that way.


As I read it the company kept the money from the house after seizing it.


Ahhh... I use Noscript and the result is when I scroll down about 20 lines there's blank space, so I stopped reading and figured it was the end of a very short article...

So the $197,000 was likely the appraised value, with the $71,000 the actual sale value when the predators unloaded it.

But it sounds from the article like the original owner does lose everything, which I hope is so ridiculous as to be untrue, but I can't tell...

EDIT: I wonder if I got downvoted for using Noscript, or what...


I'm very skeptical of that part of the article and its a little disappointing to me that HN is so ready to take it at face value. It could be true, but it could be a journalist mangling the story like they do for any technically complicated topic.


That's the law everywhere I've ever checked. Very very odd if it's not the case in D.C.


I have a hard time believing this story. If it actually is true, the local government in DC is beyond corrupt.


Frankly, this is a bigger problem that isn't nationally recognized. The mayor is under federal investigation for his campaign and I've lost count of how many officials have been arrested or investigated at the federal level.

Living near the district, I'm shocked daily by how nobody seems to care that the corruption is so widespread.


"...the local government in DC..."

That might be part of the problem... they really don't have much local government. Congress holds sway in DC. When I lived in Glover Park I thought it was one of the strangest systems I had ever seen. Never really quite understood it completely.


taxation without representation. DC barely has a local government. Its Congress who has jurisdiction. so yes, they are as corrupt as it gets. from wikipedia: "Article One, Section Eight of the United States Constitution grants the U.S. Congress "exclusive jurisdiction" over the city. The District did not have an elected local government until the passage of the 1973 Home Rule Act. The Act devolved certain Congressional powers to an elected mayor, currently Vincent C. Gray, and the thirteen-member Council of the District of Columbia. However, Congress retains the right to review and overturn laws created by the council and intervene in local affairs.[160]"


Well there are two issues here.

The first is that laws that allow this to happen are scandalous. Worst case, particularly for the elderly, is that a lien is placed on the home such that it must be paid when the home is transferred in any way. So what if DC has to wait 10 years for $137 mistakenly not paid? Seriously.

Unless the debt exceeds some nontrivial amount, the county should be restricted from taking any action whatsoever. All this to recover $137? Seriously?

If it does come to foreclosure, it is utterly ridiculous that the "investor" (I prefer "predator") gets to keep the entire sale amount. Fees (that should be capped) may be retained with the rest being returned to the owner. Otherwise this is (or should be) the unlawful seizure of assets.

Secondly, if you are such an "investor" how exactly do you live with yourself as a human being doing this? Seriously. I couldn't sleep at night.

As for the county or state officials that make this possible, how do they live themselves doing this to their constituents?


Sir or mam, I don't know you, but you're my kind of people.


The article doesn't come out and say it, but the impetus for tax sales is that foreclosure proceedings are pretty onerous and take forever. At the same time, property taxes are the primary source of revenue for the local government and must be collected. So it doesn't seem ridiculous at face value to sell the debt to private investors and let them do the collection while being able to recoup the fees involved in foreclosure which can legitimately run into the thousands because the foreclosure is a process that drags on for six months or more (with various redemption windows after that which can be a year or more).

I'm skeptical of the "lien holder gets the equity" claim because it doesn't work that way outside of DC or in foreclosure generally, so I'd be very surprised it it wasn't a misunderstanding on the part of the author.

This article talks about DC tax lien sales, and doesn't mention keeping equity: http://taxlieninvestingpro.com/category/statebystateguides/d.... It looks like a regular judicial foreclosure.


>I'm skeptical of the "lien holder gets the equity" claim because it doesn't work that way outside of DC or in foreclosure generally, so I'd be very surprised it it wasn't a misunderstanding on the part of the author.

I agree. The author suggests the owner owned the home free and clear, which I do not think is true. As you noted judicial foreclosures do not occur overnight, a free and clear owner of a $197k house would have plenty of time to: 1. take out a mortgage/HELOC for the $500-$5k tax lien, or 2. more extremely sell the home, pay the lien and walk away with the equity ($192k) before the filing of the foreclosure. Further, there is no judge that would not give such a defendant the time to pursue those options even during the proceeding if in fact the defendant owned the property free and clear.

>Not only did he lose his $197,000 house, but he also was stripped of the equity because tax lien purchasers are entitled to everything, trumping even mortgage companies.

This is from the article, and I think this is where the author could have been a little more forthright, by saying under such foreclosure and subsequent auctions the proceeds go 1st to any government liens, 2nd to mortgage holders based on superiority, and 3rd the remaining equity goes to the owner. Of course other lien holders could be shuffled into the equation (such as construction liens or HOA liens).


I'm skeptical of the "lien holder gets the equity" claim because it doesn't work that way outside of DC or in foreclosure generally

I'm not sure I understand. Foreclosure means the lien holder takes title to the property, and the current owner, the one who owes the debt that the lien holder was unable to collect, loses title. Then the lien holder, who now has title to the property, sells it for whatever the market will bear, and pockets the sale price minus whatever costs he has to pay. That effectively means the lien holder gets whatever equity is in the property once he has foreclosed on it and sold it.

This article talks about DC tax lien sales, and doesn't mention keeping equity

Well, of course not, since it only talks about buying the tax lien and foreclosing on it; it doesn't talk about the part where once you've foreclosed, you sell the property and pocket the money.

The article does describe the foreclosure process the same way I did above:

"The District of Columbia statutes require that you file a judicial foreclosure on your lien. This means that your attorney will run title, notice all the parties on title and file a foreclosure action in the court to get a judge to issue a final judgment. Once the judge rules in your favor, you can go to the DC Office of Tax and Revenue, pay any outstanding taxes and bills that may be due, and get issued the tax deed."

So you buy the tax lien, and if the tax isn't paid, you foreclose, you pay off the outstanding taxes and bills, and you get the property. The now former property owner, whom you've just evicted, gets nothing. Then you can sell the property for whatever the market will bear. So who has the equity?


>Then the lien holder, who now has title to the property, sells it for whatever the market will bear, and pockets the sale price minus whatever costs he has to pay. That effectively means the lien holder gets whatever equity is in the property once he has foreclosed on it and sold it.

Not normally, no. Usually the lien holder gets the value of the lien and the remainder of the sale proceeds go to the owner. If the owner is really "left with nothing" he didn't actually have any equity in the house.


That's not how foreclosures work. In most states, foreclosure is a judicially supervised sale in which the lien holder does not take title, but instead is entitled to part of the proceeds of the sale. Multiple lien holders may collect in case of say home equity loans, but at the end the original owner is entitled to whatever is left after satisfying the liens.

In some rare cases, with underwater mortgages, the lender may be allowed to take title.


That's not how foreclosures work.

I do see plenty of web references that describe foreclosures the way you do, but they all talk specifically about foreclosures when the lien is a mortgage. Does the same process apply when the lien is a tax lien? What information I can find suggests it doesn't--or at least, there seems to be a lot of wiggle room.


Tax lien certificates do work (sort of) like this in Texas. This is a real thing. Bid rigging is not uncommon, sometimes though, it just isn't necessary. In rural areas there are occasionally auctions where very few qualified buyers show up. Terms are usually cash on the barrel-head. Example terms of sale follow.

http://www.co.jefferson.tx.us/taxoffice/del_tax_Sale/sale_in...


Bid-rigging seems to be the main chicanery in the article. The value of a lien on a property with high-100k equity should be some percentage of that.


Which still seems totally fine and fair, right? Great, keep up with the great job!


The alternative is for the district to carry the burden of foreclosing, which costs taxpayers money (foreclosures are involved to protect homeowners) or alternatively just forgiving the tax debts of Alzheimer's patients.

These foreclosure don't just happen one day. They happen after six months of warnings, letters, phone calls, etc.


The burden? Excuse me? That's their job. I'm sorry there is a cost associated with doing your job.

If you're prepared to outsource that job and have the private sector do it extremely poorly and with no regulation, thereby effectively raping people of their wealth over a pittance, you should be prepared to pay the consequence for that.


I'm not defending the DC process. I don't like outsourcing basic government functions like tax collection. My point is that the article is very one sided. It can cost the District a lot of money to do these foreclosures themselves, because the foreclosure process is time consuming and extremely friendly to the homeowner. Those costs can outweigh the taxes owed. Should a taxpayer just be able to get away with not paying because its not worthwhile foreclosing on them? Maybe, but its not like there is no cost to that option. Its not like the DC government just decided to screw over old people one day.


> It can cost the District a lot of money to do these foreclosures themselves, because the foreclosure process is time consuming and extremely friendly to the homeowner. Those costs can outweigh the taxes owed. Should a taxpayer just be able to get away with not paying because its not worthwhile foreclosing on them?

Yes. How much do we spend every year on the disabled, seniors, and veterans between benefits, support systems, etc? What is the marginal cost to extend that support to wiping away under $1000 in property taxes?

How much public support will they require after they evicted from their homes over several hundred dollars and have no where to go? We're just shifting the burden. That's my problem.


> I'm skeptical of the "lien holder gets the equity" claim because it doesn't work that way outside of DC or in foreclosure generally, so I'd be very surprised it it wasn't a misunderstanding on the part of the author.

Here's what a recently formed lobbying organization, "At Home - The Alliance to Help Owners Maintain Equity", said in a spring 2012 letter:

""

A primary flaw in the current tax sale system results from the District government auctioning homes at tax sales even when property values are exponentially greater than the delinquent taxes (which may be as little as $500). If a homeowner is unable to redeem the home following the tax sale, the homeowner loses his/her home and all of the accumulated equity.

""

Now, the DC Bar Association's Antitrust and Consumer Law section said they agree with this letter and re-emphasized that they saw

""

Major Problems with the District’s Tax Sale System

Loss of Equity Homeowners may lose all of their long built–up equity in a property with the tax sale purchaser enjoying an unjust windfall. There is no incentive in the current process to assure that homeowners receive adequate compensation for the loss of this equity, whether through amounts paid at a tax sale or upon disposition of the property following foreclosure. DC law is more punitive to homeowners in this regard than the law of many other jurisdictions.

""

See http://www.dcbar.org/for_lawyers/sections/antitrust_and_cons... .

The Post ended up covering this as news in May 2012, about a month after this statement came out, http://articles.washingtonpost.com/2012-05-28/local/35455912... .

From that 2012 article:

""

The city’s dual-step collection process, in which the OTR is responsible for auctioning off the lien but the investor who purchases the tax-sale certificate is responsible for the ensuing action, makes for a complicated system.

At the tax sale, a winning bidder assumes the delinquent taxes on the property, any penalties that have accrued and an auction fee. If and when the property owner pays off the taxes, the purchaser is refunded the original sale price plus 1.5 percent per month interest on the tab. If the owner fails to pay up within six months of the sale and the purchaser files a foreclosure suit, the owner must also foot the purchaser’s attorney fees.

""

As far as I can tell this latest September 2013 Post coverage ( http://www.washingtonpost.com/sf/investigative/2013/09/08/th... ) isn't exactly anything new — it's just more stories about the same process continuing to cause trouble for folks with poor legal representation and very little spare money.

From a Legal Times blog post in early 2013 about the DC Council considering tax sale reform legislation ( http://legaltimes.typepad.com/blt/2013/01/dc-council-takes-u... ):

""

During a tax sale, investors bid on tax certificates for delinquent commercial and residential properties. After a six-month waiting period, the investor has another six months to sue the property owner in District of Columbia Superior Court. The property owner can pay the taxes, interest – the city charges 18 percent annual interest – and the investor's attorney fees to redeem their property, or face foreclosure.

An estimated 97 percent of owners redeem their property, so tax sales are viewed less as a way to buy property than as an investment opportunity.

""

So if I understand this correctly, it is indeed being claimed by local community advocates that if a homeowner has an unpaid $50 tax bill that is sold to an investor; and some creative accounting turns that bill into a $5000 bill; and the homeowner cannot find a way to pay the $5000, then the investor gets to sell the house and keep the proceeds. But this only happens for one in thirty tax sales.

If you would like to understand this process further and in particular understand whether the Post's latest reporting matches reality, I recommend you contact the AARP Legal Council for the Elderly — call their hotline at +1 (202) 434-2120 and they'll put you in touch with an expert. Alternately, you could try calling the media relations folks at Crowell & Moring LLP (three phone numbers listed at http://www.crowell.com/Contact ); they provide the mailing address for the "Alliance to Help Homeowners Maintain Equity" folks and would be able to get you in touch with someone who can answer your questions about the process.


Can someone point me to the laws and regulations that allow this? Someone who owns their home completely (with no mortgage) can lose the entirety of the home due to unpaid taxes? Even if the value of the home far exceeds the tax debt?

This is mindboggling to me.


The local county government can put a lien on your real property for failing to pay your property taxes, in some places, even for not mowing your lawn (an exaggeration of property maint. codes). In Texas, investors can buy a "Tax Deed" at auction. The property owner has two years to buy the lien back, for a defined price, IIRC the taxes owed + 50% for each year. After the 2 yr repayment window, the purchaser of the tax lien gets the title to the property.

http://www.nuwireinvestor.com/articles/how-texas-tax-sales-w...

http://www.dallascounty.org/department/pubworks/documents/St...


An example of a city that does put a lien on the property you're living in if you don't mow your lawn properly:

http://en.wikipedia.org/wiki/Bella_Vista,_Arkansas

First-hand experience.


Are tax liens different from other kinds? It's my impression that if e.g. a lender repossesses, they sell the house, pocket what you owe plus fees, and have to give you the rest back. It's strange to think it would be different for unpaid property taxes. Was Coleman truly "left with nothing" or did he get a portion of the sale proceeds?


The rights of the tax lien holder trump any other claims, AFAIK. That's one reason that mortgagors want you to escrow your annual property taxes with them.

edit: IRS liens in effect before the sale go with the property, and can delay the new owner in getting a title policy.


Texas laws regarding property and property taxes seem rather un-Texan.


Don't let anybody fool you. There are a lot of goofy things going on around here.


What is also crazy about it is that the government is apparently not setting a high enough price for the liens. If they correctly priced the 'option' that the lien wouldn't be paid and the buyer could foreclose, then it wouldn't be so attractive for the predatory buyers. So the government is allowing itself to get ripped off too.


Well, theoretically the price of the lien should never be bigger than the price of the debt. The price should be (debt x odds of getting payed). These are usually bought in bulk

But of course, with this "new method" it makes sense to be higher.


Well, in Texas the liens are sold at auction. But yeah.


The article clearly states that the liens in DC are sold at auction.


Well, it's generally been the case that the government could seize property due to failure to pay property taxes. The problem is that the government here is, bizarrely, selling the liens to "investors" rather than just collecting the taxes owed.


It has always seemed to me that property taxes are a completely incorrect idea; far more onerous than, for instance, the estate tax. Have there been any serious efforts to get rid of them?


Property taxes are very progressive and we should absolutely have more of them (fair ones, not like the one in this article where you lose your home if you fail to pay some trivial sum).

The reasons are best described in the article below, but in summary, we all pay to defend and enhance your property (by supporting the police, roads, local services, etc). It's fairer for property owners to take a larger share of this burden since they alone get the benefits from it, like the ability to sit in the garden and enjoy the view or the increased value of the property when the government builds a road to it. Land taxes also raise revenue without deterring productive work (unlike, say, income tax).

http://stumblingandmumbling.typepad.com/stumbling_and_mumbli...

To answer your direct question, since property owners are overrepresented (they vote more often and are far more likely to be politicians), yes of course they've tried to get rid of progressive property taxes. eg. This in Nevada:

http://www.interstice.com/~drewes/allodial.html


>Property taxes are very progressive and we should absolutely have more of them.

The naivete, here, is of course, that the wealthy don't have more resources to protect themselves against property taxes or reduce their burden, or deal with enforcement, or mitigate corruption by the state.

In reality though, there is no "rules scheme" you can construct that will be as progressive as you want. You'll tack on more rules to tweak it to satisfy your conscience that you're not hurting the poor. The wealthy will hack this and find a loophole, and even if they don't, the burden isn't so terrible for them. Slight infraction by the poor will be come down upon disproportionately by the government (because the cost of enforcement against the poor is lower because of lowered risk of having it fought in the courts) and 'an example must be set'.

Although your property tax was designed to be 'progessive', it instead, wound up being a barrier that is difficult to surmount. It is naive to think that the state will be this hyper-logical ultra-fair machination. It's not, and it never will be.

Instead of socially engineering through the state, everyone would have been far better off if you helped the poor by reaching into your own pocket. But, of course if one is selfish, that's not going to happen - and it's far easier instead to project one's own selfishness onto other people, extrapolate onto all of society and use the state to run your charity for you.


Property is harder to hide than other forms of wealth. You can hide your money in an offshore bank account. It's pretty hard to hide land. If there's a piece of land, someone should be paying the land tax on it (if whoever owns it is hiding, the people can grab it back).

So land tax is fair and progressive (the more land you own, the more tax you pay).


Gaming the property tax system is not a binary proposition. How do you assess its value? How does the state choose whom to go after?

Did you even read the WaPo article? Do you not see how the existence of a property tax has come around to hurt exactly the most vulnerable population (and in this case, through no directed malice) I promise you, people living in Palisades (the richest part of DC) are not worried about property tax liens because they can pay people to deal with paying the taxes (either legally, say hiring an admin, or extralegally). It's not progressive because the bureaucracy and the hammer of the state causes a greater fundamental inconvenience to those of less means than to those of greater means.

As to the hammer, do you think the DC government would have sent "armed US marshals" to recover the house if it were in the Palisades? Why or why not?


It's not the tax that's the problem. It's a law which lets them seize the land for a few dollars in unpaid tax. That's just a heinous law. What's the next step? Repossessing kidneys for small unpaid medical bills?

Many countries have land taxes which work reasonably well. There can be some proscribed formula (based on a regression on nearby property). Or they can do valuations. There'll always be problems, but it's not more evil than many other taxes (unless they enforce it by stealing property).

Maybe the government will send in SWAT teams to collect unpaid land tax bills from poor people, and a friendly note to rich people; but that's not because it's a land tax. How do you think they treat unpaid parking tickets?

The advantage of taxing the use or consumption of a scare resource (land) instead of income should be obvious. If Bill Gates wants a mansion, he's making it harder for normal people to buy a home. If Bill Gates makes a billion dollars selling some operation system, he's presumably creating jobs, and making a lot of people happy (since they can get on the internet without buying an expensive Mac, or having to figure out how to configure their modem using Linux). (Note - some rich people make their money by being parasites, but capitalism works because this usually isn't the case).

Finally, there's the stabilising effect that a land tax has. Property is a huge investment, driven by unsophisticated retail investors (who may be putting most of their life's savings into a single home), prone to stupid fluctuations, which can destroy the lives of normal people when it does something funny. Taxing it helps keep it a little rational (as the taxes will encourage people to avoid it when it starts heating up).


1. >It's not the tax that's the problem. It's a law which lets them seize the land for a few dollars in unpaid tax.

What happens if they refuse to pay the tax, then? As an agent of the state, how do you make them pay? You might send them some letters with warnings. Of course then they might continue to shirk the law. You can ratchet up the tax, by charging interest. Ok, but that's a number. They still refuse to pay. How do you make them pay?

2. your logic is questionable:

>Property is a huge investment, driven by unsophisticated retail investors (who may be putting most of their life's savings into a single home), prone to stupid fluctuations, which can destroy the lives of normal people when it does something funny. Taxing it helps keep it a little rational (as the taxes will encourage people to avoid it when it starts heating up).

Having children is a huge investment, driven by unsophisticated people, prone to stupid fluctuations, which can destroy the lives of normal people when it does something funny. Taxing childbirth helps keep it a little rational (as the taxes will encourage people to avoid sex when it starts heating up)

Does that sound like reasonable public policy?

And aside from the policy ethics I strongly doubt your model that property taxation is a significant 'tempering agent'. If you're going to call the buyer an 'unsophisticated retail investor', it's unlikely to presume that they will have a 'sophisticated' concept of property taxation, either, especially when the government can change its parameters at will.

Finally, if you're going to argue that property taxation is supposed to be a detterent for people who you are codedly calling 'unsophisticated' (whether or accurate or not, that reads to me as 'poor people') to 'rash' purchases, well, thank you for demonstrating my point that it's tax with regressive outcomes.

If you can show me a citation indicating that property tax keeps housing prices 'rational', I'd give it a second thought.


> How do you make them pay?

OK, in extreme circumstances then seizing the land, selling it, then giving any residual (after taxes are paid) back might be necessary. The problem in this thread is, the residual didn't get given back, and it doesn't seem they followed due process.

> Having children is a huge investment, driven by unsophisticated people, prone to stupid fluctuations, which can destroy the lives of normal people when it does something funny

There's no "child bubble", in which people all want to have children when the price of children goes up. I don't follow the analogy. Wait ... you mean it's a financial risk? Good point, maybe children should be taxed, but since having children isn't always voluntary, and there's no way you can stop a person who can't afford the tax from having a kid (at least, no ethical way), then it's' probably not such a great idea.

> And aside from the policy ethics I strongly doubt your model that property taxation is a significant 'tempering agent'.

It just makes sense. As you've asked, I can find some economists who think it's a good idea. Here's some review - http://www.enhr2011.com/sites/default/files/Paper-Haffner%20...

One of the things it cites:

http://search.oecd.org/officialdocuments/displaydocumentpdf/...

Basically, yes a tax on value reduces volatility. Maybe. It's a credible idea, though it would be nice to have some more research. Transaction taxes are not such a great idea. Tax breaks on houses increase volatility.

And it's not a tax with regressive outcomes. Really poor people rent. I'm just saying "unsophisticated" to mean "people who don't trade for a living". Most people who invest in housing aren't professional real estate investors.


Maybe I'm not as impassioned as I should be, but I just see this as a question of how best to provide common services.

For instance, if I had 5 acres in the middle of nowhere, I might be expected to chip in to a fund to keep a fire on my land from spreading to adjacent BLM property. However, my acreage is likely to be taxed more or less based on the quality of the view, or another similarly cosmetic factor in land value. Why not just calculate my share of the public fire suppression expenses based on area? Assuming, of course, that sufficiently many of my neighbors feel compelled to intervene in cases of wildfire.


>why not just calculate my share of the public fire suppression expenses based on area?

remember:

> there is no "rules scheme" you can construct that will be as progressive as you want.

What you propose may be 'fair'[0], in the context of providing services*. But that is not the goal of progressivism, which is redistribution of wealth and creation of an more outcomes-equal society (a concept I'm personally not opposed to, if the state doesn't do it).

[0]but even fair in your example isn't quite correct. Because area is not proportional to fire risk. Let's say I live in the valley, where a stream runs through, the vegetation is green, and the area never gets hit by lightning. And my rich neighbors a mile away are on the mesa, which has a great view, but is brown and always dry, and up high, so lightning hits there regularly? Should area be a fair assessor of fire risk? Is it fair to have me subsidize the fire protection of the rich people who live closer to where fires happen? (this is a simplified description of the very real LA county fire system where rich people live out on the hills where there are far more brushfires)


I'm not actually opposed to progressive taxation either, by other means.

I can think of a few solutions* to your counterexample though, and that's the point. There's no reason to expect a solution to be fair in all cases, or perfectly fair in any. I'd only argue that there is often, or perhaps always, a more equitable and direct way to provide for common services than property taxes.

*I choose the BLM as a neighbor purposefully. The rich people in your example would almost certainly prefer to fund their own municipal utility than settle for the type of response I would expect the state or county to provide.


I think by attempting to patch the system, you are merely shifting the corner cases which are unfair. And the more byzantine the rules system is, the fundamentally unfair it is to the politically and economically disposessed, because their ability to deal with the bureaucracy (and the rules system) is diminished. To wit: the more rules you have, the more difficult internal consistency becomes, and the government will naturally tend to bin individual citizens into whichever category they can extract the most revenue from, instead of doing due research into the highest efficiency for the taxpayer. The responsibility to identify the deductions falls on the taxed. This becomes regressive, as the ability of the wealthy to argue for and appeal their binning category to the one that is 'rightful' in your byzantine system, is greater than that of the poor.

And the unfairness will always over time become skewed towards the wealthy and powerful (municipal authority:'well obviously we are authorized to make exceptions like X as precedented by our rules system in code ZZZ, subparagraph Q; if we give an advantage to corporation Y by implementing change T, it may not necessarily be in the spirit of total fairness - but we will create jobs! and thus it will be in the public interest'). If fairness is your dominant value, the only perfectly fair and sustainable solution is zero. If progressive redistribution is your dominant value, you will wind up with a lot of difficulty over the 'how much is enough' question, and the implementation will almost always find a way to be anti-progressive.


Agreed: we're stuck with a byzantine tax code for the foreseeable future, and it will continue to be monumentally unfair. But that fact doesn't stop us from taking real property value out of the equation altogether, at least in unincorporated areas.

Would you at least agree that things don't have to be quite so complicated once you get out of the city?


I don't think I like that idea. Sounds like a good way to throw Native Americans, Amish, and others who can't or don't wish to participate in the traditional labor force off of their land.

disclosure: I am an ordinary, average, white, property owner, not Amish (Atheist, actually).


At some point, you cannot realistically expect your interests as a class if you refuse to participate in the political system, for better or worse.

The notion that we can be isolated within a nation and refuse to take collective responsibility is a dream that has never had much foundation in reality.


A property tax will also make sure that the landowning class either makes productive use of their land or loses it, rather than hoarding it as an anti-competitive measure.


Comprehensive (UK-focussed) site dealing with arguments against a property tax in the form of a tax on the imputed rental value of land: http://kaalvtn.blogspot.co.uk/

(Note that property owners would NOT take a larger share of the burden; as with council tax, responsibility for payment would fall to tenants, to the greatest extent that market forces will permit. For council tax, that is currently "tenant pays all of it". No reason to assume a land value tax would be different.)


Absolutely! A land value tax (on the base value of the unimproved land) is an idea that goes back hundreds of years. It has many attractive properties when compared to other taxes like sales and income tax. It's a shame it hasn't really ever taken off.

http://en.wikipedia.org/wiki/Land_value_tax


There's no way the government will use the appraisal system to screw over the poor!


Excellent reply, and your position is completely reasonable. I would submit, however, that there is more variability in how and where people choose to live than your views can completely accommodate.


Why not just go the whole hog and tax all property.

eg you buy a laptop, you have to pay the government a tax each year to keep it.

Why just apply it to houses? May as well just prohibit people from owning property.

Personally, I think such taxes are a massive disincentive for people to do well. As soon as you have enough money to buy a house, you are penalised for it.

Luckily in the UK, we don't have property tax, although we do have other taxes just as disgusting and unfair - stamp duty, inheritance tax, council tax.


This is the law in Utah and was applied to all businesses up until a few years ago. I don't think they ever tried to property tax the personal possessions of individuals, though that was the law.

You were required to declare your chairs and desks and tables, calculators, paper and pens, books, bicycles, cameras and computers, and everything and look up its market value and then pay the usual tax just as if it were real estate. You were required to do it every single year. And it's still the law for property above an exempt amount, but no longer applies to every paperclip like it used to.

That law is crazy, of course. Real estate is a big expensive immovable item that creates limits on the level of corruption and record keeping headaches so it's the best target for property taxation. Maybe really big vehicles like cars and airplanes and boats could be targets, too, if they have a home base, but even then you can see problems.

And finally, Henry George [0] points out that the ideal property tax to promote investment, limit corruption and cheating, allow fair administration, limit any kind of dead-weight loss [1], and generate reasonable revenue would be a tax on land value only. Buildings, improvements, vehicles, and personal property should be exempt and only the land's location, area, and fixed geology/hydrology/soil conditions should matter.

[0] http://en.wikipedia.org/wiki/Georgism [1] http://en.wikipedia.org/wiki/Excess_burden_of_taxation


Property taxes add liquidity to the market, and lower prices on everyone, as the cost to own real estate is not zero. Negative side effects that areas with no property taxes include

* blind investments into endless real estate development projects that have no tenants or structural quality (China, Dubai)

* extremely high prices for anyone entering the real estate market (old European monarchies, where a family might have owned the same real estate for centuries)

* lack of funds for upkeeping and maintaining what's considered a shared property (facades, sidewalks) while maintaining fancy interiors (Eastern Europe)


Property tax is primarily a disincentive to buy lots of land you can't do anything with and sit on it (metaphorically). That's a good thing- it means the incentives will push land into the hands of people who are actually going to do something with it (making it worth paying the property tax)


>Property tax is primarily a disincentive to buy lots of land you can't do anything with and sit on it...

No. Property tax is primarily a means for localities to raise revenue. If what you were saying were true, then developed land, including primary residences, would have no associated property taxes. It'd be exempt.


Regardless of the intent, property taxes do serve both purposes. Developed land must provide a return above and beyond the property tax rate in order to be profitable. That includes primary residences, where the return is... not easy to measure in dollars.


Absolutely. If we had reasonable property taxes in CA, we wouldn't have a housing shortage, and middle-class people would be able to live in SF again. But try explaining this to the average voter...


By reasonable you mean the same taxes for the same value, ie the opposite of Prop 13, right?


yep


In effect we do have a property tax on laptops, but for convenience you pay it up front (VAT @ 20% of the value). It pays for all the same things such as helping the police to defend your laptop from being stolen, and paying for the ports and roads along which your laptop was imported (as well as the national debt which was increased when you imported it).

Council tax is the UK property tax. It's a very low-rated and regressive tax, but it's a property tax.


Good luck getting any value from the UK police of your laptop is stolen.


In Massachusetts they do:

"All personal property situated in the commonwealth is subject to tax, unless specifically exempt by law"

http://www.mass.gov/dor/local-officials/municipal-finance-la...


True. When I lived there in the 80s, I remember getting fairly hefty annual bills for excise tax on my car. I don't know if they still do that or what classes of property were routinely taxed at the time.


Do you think income tax has proven a big disincentive for people to go out and work?

(To ancitipate an obvious rebuttal: yes, I will admit that inheritance tax has probably put people off the idea of dying.)


Higher rate income tax certainly does. Tax bands certainly provide a big disincentive for bothering to get a better job/raise.

Inheritance tax is very unfair. If you are rich enough, you'll plan around it and avoid it. But if you're not rich enough, your kids will not only lose their parents, they'll be sent a bill from the government. Which at best is a tad insensitive.

Add to that the fact that the thresholds for inheritance tax haven't been raised properly, so that someone with a 1 bedroom apartment in London will be subject to inheritance tax, it all seems pretty unfair, and perverse for the government to effectively profit from peoples death.


>Tax bands certainly provide a big disincentive for bothering to get a better job/raise.

You know that your entire income isn't taxed at the highest bracket's rate, right? So, for example, the highest bracket is 39.6% for income above $400k. If you make $410k, $10k is taxed at 39.6%, and the rest of your income is taxed at a lower rate.


You know that the effective tax rate still raises?

For simplicity sake, consider that first 100K are taxed at 10% and next 100K at 20%. If you made 100K your effective tax had been 10% i.e. you owed 10K to the government, however if you made 200K, even though the first 100K is still taxed at the same rate, your effective rate is 15% because you now owe 30K out of 200K.


Yes I do know that. It's still a big disincentive to bother earning more money.

Why bother trying harder if the government will take half of anything extra you make?


The question is a fair one, and the answer for the majority of people seems to be: because you get to keep the other half.


Well, that is a little consolation for you, true, the government lets you keep a little bit to keep you from rebelling and keep you placid.

However, I feel that I'm already paying the government FAR more money than I should be, so I'm simply not bothered about trying to make them more money.


Your position is not unreasonable, nor inexplicable, just unusual. For the majority of people, income tax seems to be an annoyance rather than an active disincentive to work.


I understand greed, and as much as I loathe it, I also understand the mindset that looks at money as a score, but I've never understood this mindset that is unable to recognize the "score" is not absolute, and taxation does not have a 1:1 impact. Progressive taxation renders the scale non-linear.

Given a hypothetical luxury good with a price of $500,000 under a current taxation regime, which do you think is more likely in a regime with, say, 50% higher taxes: That the luxury good ceases to be produced, or that its price is lowered to the point where a similar number of people as before could afford it?


I don't look at money as a score. I look at my salary as the value of my labor. I sell my labor to maximize the value of my effort. I.e. I am looking to maximize my compensation and minimize my effort. It's pretty much how everything on the market works.

To answer your second question is impossible - we don't know the shape of supply and demand curves nor do we know the initial rate of taxes. E.g. if the original taxes had been 1% then it's just going to bump the price a little bit. If the original taxes had been 50% then it ceased to be produced.

But if you want to know the general relation of taxes and supply and demand consider how things are going to progress as you keep raising taxes. Do you seriously believe prices are going to fall as the taxes raise?


I think if you cut everyone's income of fiat currency by half, the effect is not that everyone is 50% poorer. I think if you cut everyone's disposable income of fiat currency by half, the effect is not that they can afford 50% fewer luxury goods. And I don't think any of the uber-wealthy sit around and think "You know, I was going to make an extra billion in the market, but since I'd have to give up 20% to capital gains, I'll just stick all my money in a non-interest-bearing account instead.".


JFYI - if you take every US billionaire's (all 400+ of them) money (about 1.9T) and split it among everyone in the US (300M) you get about 6300 dollars per person. It's not a lot of money. Might pay your rent and utilities for a year. And then it's gone. It's not their income, it's their whole net worth. So I'd stop fantasizing about money of uber-rich. There is not that much and it does not matter.

What matters is the people who are actually paying the bulk taxes and making investments.


I'm not "fantasizing" about anything. I'm familiar with those numbers, thank you. They change nothing. Nothing I've said even depends on or has any direct relation to them.


Inheritance taxes aren't an issue if the estate is valued - this is after all expenses, debts, etc. have been taken care of- at less than $5.25 million.

Numbers vary, but it's definitely fewer than 5% and possibly fewer than 1% of households that need to do anything at all to avoid the estate tax. And these are people who have benefited immensely from services provided by the government (if only the services that keeps people from stealing their wealth!) and are really doing quite alright; adjusting the tax code to make them do even better seems unfair.

Secondly I have never heard of anyone who didn't want to make more money because of their tax bracket. I do not believe this phenomenon exists, and even if it did, it wouldn't strike me as all that much of a problem in a population with unemployment as high as our own.


In the UK, inheritance tax starts at around £325k - which is basically a little bit above the average house price.

http://www.hmrc.gov.uk/inheritancetax/intro/basics.htm

You can get around it by 'gifting' things to your kids, as long as you then don't die for 7 years after etc etc.

On your last point, it certainly does exist. What I think happens is people like me don't bother trying so hard, because I'll be damned if I'm going to give the government more money. However, people who are already making much more than me, just hire a good accountant to 'make the problem go away' - eg register offshore companies etc etc

Are you seriously saying, that when the UK government had a higher tax rate of 97% in the 60s/70s, you would have been more than happy to do that extra overtime work, and would have gladly received your 3%??? Crazy

Anything over 49% is slavery, and will end up crippling the country rather than raising more tax revenue. Which is why it was absolutely right and proper that the current government reduced the top rate from 50% to 45%.


They already do tax it for businesses in various jurisdictions, e.g. in Florida (see "tangible personal property").


Many counties in Texas do tax business property. I know I have to pay business property taxes every year to my county.

Here, generally, personal income taxes are replaced with property, sales, and business (franchise) taxes. You pay taxes, as a person, on your vehicle, real property, and per taxable transaction. But, you do not pay it on your income.


In the UK you don't have property tax, and this gives rise to the concept of leasehold land. Instead of paying rent to the government you end up with people paying rent to a private company. Instead of getting better local infrastructure as a result of your rent, you enrich the family that purchased your land over 200 years ago.


The government tried collecting the taxes, and the owners did not (perhaps because they could not) pay. So the government auctions off the house to make good on the debt.

What else could the government do, put the homeowner in debtor's prison?


It auctions the lien, not the house. The new lien holder then foreclosures on the house and takes all the remaining equity.


You are correct, they buy the lien and have to foreclose later.

I'm still curious what myname would propose as an alternative collection scheme. The article mentions that Michigan stopped doing tax lien sales, so I checked up on what they do now: https://www.tax-sale.info/html/index/page/general

SPOILER: > The properties are then sold by deed at auction.

Not much of an improvement over the lien process; just a faster foreclosure.


In some places they would garnish the debtors income.


Tell me again how government does such a wonderful job protecting the weakest & most vulnerable.


DC is notoriously slimy with taxes. It's not surprising that they would do something like this. For example, DC tries to trick VA and MD based businesses into paying corporate taxes in DC if they work with the federal government based on the unsound lie that because the federal government is based in DC any business that works with the Feds must pay DC taxes. Even if that business never sets foot in DC, or works with a single federal person in DC.

Thankfully VA and MD don't recognize this twisted logic.


Tell me again what system actually does a wonderful job


Things like this would never, ever happen in most "socialist" European countries.


Yet another thing I would do if I was rich: buy up the unfortunate circumstances and forgive them.

I understand how it would be hard for the government to implement a policy to do the same, but this situation is ridiculous.



Yes many of us would-- in the case of the subject of the article, it would've only required $134 if done early enough (before it snowballed to $4,999).

An important part of the article is that the subject profiled had dementia and was thus may not have been able to understand what was going on and was basically taken advantage of, albeit legally.


Meta note: this is what journalism can look like today. Made for the web first, not for the paper. Visualizations that are actually insightful - and most importantly a well researched story.


Absolutely - I noticed that too. Exceptionally well done from a web publishing standpoint.


They researched this for 10 months, not 10 minutes. The quality of the research shows.


Totally agree. This is an incredibly well presented article that makes great use of the web to create a more insightful, moving experience. Internet storytelling well done.


this.


Sorry but WTH?!! 134/197000 is 0.068%. And if this was not enough, I read this -

    A 95-year-old church choir leader lost her family home to 
    a Maryland investor over a tax debt of $44.79 while she 
    was struggling with Alzheimer’s in a nursing home.
Sometimes I wonder what's wrong with people in the world.


I think so too. Forget the laws, if you're a "investor" who bought a tax lean for $50, and that lean led you to own the deed to a $100,000-$200,000 house of Alzheimer's patient, don't you stop for a second and consider the moral and ethical implications of collecting on that lean?


Ethics? I would want to know how is that even an apropos penalty given the defaulter's age and mental health. This is literally bordering on the insanity!


Not in the world. Only in the "Land of the free".


Not sure why you are downvoted, when you are pretty much correct. In the Western world, America seems to be rather unique when it comes to the economically strong preying on the weak.


Sad, right? If I had to guess, people are getting increasingly desperate. The things that used to help them get by don't work anymore (or don't meet the full capacity), and in exchange for money, they're willing to destroy the lives of others.

Scary fucking world.


Queue up the Ayn Rand acolytes in 3...2...1

It's not a coincidence that this is happening to mostly elderly people who otherwise own their properties in the clear, people who are often burdened with serious health problems.

There is a simple fix. Require the liens to be paid off when there is a change of ownership. The city knows what it is owed, and that it will get the money eventually. If the city needs the money today, it ought to be able to borrow the funds (not all that different that accounts receivable factoring). Throwing people out of their homes over small amounts is inhumane.


Say what you like about Ayn Rand, but she was hardly a fan of out-of-control government/private collusion to seize individuals property in a manner completely out of proportion to the size of their debt.


That was the flaw in her reasoning that big business and govt can and will be somehow separate entities. They never are. They are effectively the same entity. Look at chiefs and heads of regulatory agencies, they are often ex or future CEO of industries those agencies are supposed to police. Look at many military industrial contractors they often hire ex-generals and so on. And all this in the land of "law and order". Imagine in other countries with less "law and order".


For sure. Good point about the contractors hiring generals. There are lots of different revolving doors in different industries.

If you work at a major investment bank, why would you speak out against government regulation of your industry when you might need a bailout some year in the future?

If you work at a government regulator (e.g. the SEC), why would you regulate the industry too hard when they are going to be your biggest source of consulting fees after you leave your government employment?

For example, Bernie Madoff's brother was a director of SIFMA (Securities Industry and Financial Markets Association) for two years.


I can't really see Ayn Rand supporting the seizure of property over unpaid taxes. I'm not an Ayn Rand fan, but it's pretty easy to figure out what she does or doesn't believe in from her writings. And taxes are definitely in the "I don't care for that" category.


I am a (limited) Rand fan -- I think she inadvertently explored some interesting ideas, particularly about the limits and problems of wealth/power in The Fountainhead, lost on most of her acolytes though they seem to be -- and my suspicion is that Rand would be pretty much fine with this outcome if we could just get government actors out of the equation and have private parties taking homes from people.

For an example, consider an HOA taking a home from someone over unpaid fees.

(Incidentally, if one were looking for a crystal ball into what private/libertarian governance would actually start out looking like in the first world, I'd guess that the problems of HOAs would probably give a pretty good idea.)


> my suspicion is that Rand would be pretty much fine with this outcome if we could just get government actors out of the equation and have private parties taking homes from people.

Absolute nonsense....I can't think of a single Rand writing that would support this notion in the slightest. One of her primary principles was that the desire for the unearned was a "sin" (or whatever equivalent word she used).

Taking someone's home over a small tax bill is definitely unearned.


"Earned" is a slippery concept that can take some funny turns depending on who's using it.

If someone who's halfway through paying their mortgage stops making payment, has the bank earned the equity the borrower has put in? You might argue they haven't, but this isn't absurd.

If nothing else, advocates for the lender -- and, in general, libertarian voluntarists -- would argue that if both parties have agreed on the conditions, execution of them is justly earned.

And if you want Rand cite for that, read the Roark/Rand courtroom soliloquy where it's explained why it's OK for him to blow up a building (sure, other people may have put in sweat and equity, but that's nothing compared to his contract).

Well, why not the same thing for an HOA? Nobody held a gun to your head to move into a property that's part of a private collective. If Roark can uphold his aesthetic conditions, surely an HOA can uphold whichever please them, and ask for their fees, and blow you out of your building if you don't comply.

Now, if you think that there's a flaw here -- perhaps that "as agreed" is not necessarily the same thing as "earned" -- I might agree with you. Perhaps Rand even says something to that effect elsewhere. But at the same time, the entire climax of her second most famous book turns on a different principle.

(Also -- I have my doubts that anybody has any true claim to have earned most of what they have. We all have a heck of a free ride as far as life and resources go.)


'Well, why not the same thing for an HOA? Nobody held a gun to your head to move into a property that's part of a private collective.'

Exactly, and that's the difference. Nobody held a gun to you head to move into the HOA collective. You knew the terms and consented to them when you moved in. Conversely, you are held to the laws of the state by the force of, ultimately, guns.


Aaand, there it is. We now have the argument I predicted Rand would endorse given apparently in earnest.


I'm not a randian, so I can't speak with complete accuracy to what she (or objectivists) would argue. Personally, I would question the morality of such a contract. There could be problems if the HOA changed the rules of the contract afterwards (because in that case it would be acting as a government).


> If someone who's halfway through paying their mortgage stops making payment, has the bank earned the equity the borrower has put in? You might argue they haven't, but this isn't absurd.

It's pretty logically and mathematically definitive, only in present society with bankers gone wild could it be terribly questionable who owns what. Common sense is usually sufficient.

> And if you want Rand cite for that, read the Roark/Rand courtroom soliloquy where it's explained why it's OK for him to blow up a building (sure, other people may have put in sweat and equity, but that's nothing compared to his contract).

Honestly, it's been ages since I've read that book so I can't comment intelligently. That sounds pretty crazy, but I have a feeling you're taking a negative interpretation, although I may be wrong. I tend to find Rand's larger principles correct, if not practical, while I differ on some of the smaller ones (Food Safety / restaurant inspections come to mind).


>I can't think of a single Rand writing that would support this notion in the slightest.

I could see it if MAYBE the HOA had that as part of a written agreement consented to the homeowner at the time of home puchrase. Of course, that's exactly not how government works.


Why would an Ayn Rand acolyte support the state taking the property of private individuals?


I was referring to the generally sociopathic attitude they tend to adopt toward The Poor.

BTW, this is a privatized operation wherein predatory debt collectors buy the liens, foreclose the property, and then flip it at a huge profit. Just another example of government acting as stenographer for the financial industry.


> Just another example of government acting as stenographer for the financial industry.

Did you actually just say a sentence with the phrase "government acting" in it as an example of something Ayn Rand would be in favor of? HAHAHAHA....

(I'm not in the Ayn Rand camp, but I think you're missing the basic concept of what she was about.)


It's privatization of tax collection; a Randian/Thatcherite dream.


Collection of taxes being private, and the fairness of the rules are two entirely different things.

"Randian/Thatcherite dream"...as if they want people to lose their houses. You are very misinformed on Objectivist principles.


The principles emphasize process over outcome. So it's not that they want people to lose their homes, but if things happen the 'right' way and that's the outcome, so be it.


Actually, they don't emphasize process, they emphasize who does it, and what is done. Objectivism prefers the government not to handle most anything, but would never advocate people losing their property over a minor tax bill - that is theft, a very big no-no in Objectivism.


> they emphasize who does it, and what is done

Yea, that's what process usually entails. I don't see outcome in that list.


> I don't see outcome in that list.

Well, property is sacred in Objectivism and "stealing" is a deadly sin. I'll leave it up to you to decide whether taking someone's home over a tiny unpaid tax bill would be considered stealing. (Hint: it is.)


…and thus the internal contradictions inherent in Objectivism are laid bare.


You really have no idea what you're talking about.


Fair enough. Atlas Shrugged was such an awful book I couldn't make it past the first few pages. However, I have enough experience with Rand's followers and their "got mine, screw you" attitude to see how a shitty book can get turned into a political movement. See also Mein Kampf.


And the Redditization of HN is now complete.

Also, Godwin's law alert!


Oh, that already happened, years ago.


> I was referring to the generally sociopathic attitude they tend to adopt toward The Poor.

Do you really expect anyone to engage with you when you call a well-known author a sociopath without justification? Might as well call her a child rapist while you're at it.


Ayn Rand was poor.


It's happening to elderly / vulnerable because anyone else, faced with losing their house over a $50 tax bill, would pay the tax bill. This isn't something that happens in a single day, or in the middle of the night.

I'm only familiar with the tax sale rules in one Connecticut town, but the include a provision for the (delinquent) taxpayer to pay their bill in full within 30 days of the auction to cancel the sale / lien.


This story is not about a government department doing what it is charged with doing. This story is not about privitization of collections. This story is not about the well known DC corruption issue. This story is not about tax collection automation, ie removing the knock on the door. This story is not about people that buy tax liens, which as a side note do not know the circumstances of the lien.(barring collusion)

This story is about the fact that this man had no one. No one to make sure is ok. No one to ask if has been forgetting things lately. No neighbors that might have checked in on him. No family that was attentive enough to realise he may need help with the 10 giant boxes of mail by the door. No one that gave enough of a shit to just ask how he was doing.

When was the last time you checked in on that elderly lady that lives next door to make sure she is doing ok? When is the last time you did a little checking up on your elderly family? When was the last time you took the time to make sure the people around you are not getting to the point where they need help?

As a side note, please read the entire article.


Does anyone have any idea how much it costs a traditional newspaper to produce an article like this? They've listed 15 people in the "Credits" section at the bottom. Seems cost-prohibitive.

Written by Michael Sallah, Debbie Cenziper, Steven Rich / Graphics by Ted Mellnik, Emily Chow, Laura Stanton / Photos by Michael S. Williamson / Editing by Jeff Leen, Steven Kress / Research by Jennifer Jenkins / Production by Chris George, Connor Jennings, Bronwen Latimer, Michelle Williams, Tim Wong

Edit: clarity


True investigative journalism is a remarkably expensive process with little chance of recouping overall costs. Even after the initial draft, an extraordinary amount of fact checking and editorial requirements/standards are applied to the piece. Some of it's for reputation reasons and a lot of it is for legal reasons: slander suits aren't cheap.

I hope papers start providing full 'Credits' to what goes into a piece so as to better inform the reader how many people in the chain it takes to arrive at the final copy.


The "producers" are likely just management and several of the rest may in fact be unpaid interns trying to break into the industry.

But researched articles like this are expensive to produce. That's why PR firms are so successful. Reporters need others to find and research stories for them.


Production has a different meaning in publishing than in movies, which is what I think you're referring to.

In print, production is the act of taking the raw inputs (copy, graphics, layout) and getting it out the door. E.g., the print production managers I know manage the physical details of the print medium. There is a similar meaning in advertising. [1]

Looking at the resumes of the first couple producers, one's a designer, the other lists himself as "Nerd". So I think they are using the meaning from publishing: people who produce the final product.

[1] http://en.wikipedia.org/wiki/Advertising_agency#Production


It took them 10 months to research this. No doubt there was a lot of effort involved.


And yet I still see people saying "no, how dare you compare government to a bunch of thieves?".


The DC local government is somewhat remarkable in how corrupt it is. It seems like every other day some major political player gets indicted for corruption of some sort.


DC is in some ways an anomaly; US citizens deliberately disenfranchised by the Federal Government. It's not surprising that they might be extravagantly corrupt.


And they should keep saying that. I agree that some portion of government operations are dubious. I believe the portion is pretty small. The people I know who work in government are there because they want to make a difference. They would be just as outraged by this as anybody. More so, really, because they see stuff like this as shaming public service everywhere.


I have no doubt that most low-ranking government employees believe they are doing good and I don't blame them. But it doesn't matter and it doesn't change the fact that they are involved in extracting money from people with a threat of force. If you can't convince people to finance something, whatever it is, and you still collect money from them, you are stealing.


Ah, maybe the difference is that I live in a democracy, where we vote for people who set budgets, and often vote directly on the taxes ourselves. So the only people threatened by force here are those who try to be free riders on the system that the people have jointly set up. It may be different where you are.


No difference. Why do US citizens have to pay for wars and killing a great number of innocent people in them, or Guantanamo, or NSA, or TSA... when the majority clearly opposes it? Democracy is a nice myth, which gives surfs a false feeling of satisfaction and control, obscuring the reality, which is that you are being robbed. "You can always leave", as has been noted before, is another myth: yes, spend 5-6 years on the paperwork and then leave to yet another democracy that's gonna steal from you.

Look, I understand you believe in the idea, but the harsh reality is that you are being tricked into obedience by your rulers/owners. My country is no different. The standards of living may be lower, but the fact remains: no government ever truly cares about its citizens. It's nice to think they do, though. But look at the incentives. There are none.


I certainly grant that things are not perfect here.

Regarding your particular questions, in May 2003, 79% of Americans thought the Iraq war was justified, so the majority clearly didn't oppose it. Most now believe it was a mistake. Only 41% of citizens agree with the president's plan to close Guantanamo. A majority of Americans think the TSA is doing a good job. I think the majority of Americans are wrong on all of these things, but they are undeniably popular opinions.

I, personally, am not being robbed. I am also not being tricked into obedience. Your insistence to the contrary, entirely ignorant of my actual situation, is arrogant foolishness. I've lived on four continents, and I'm quite happy with what I have here.

Could it be better? Sure. Is it at risk from powerful interests? Definitely, especially at the federal level. But I also see many causes for hope.


Fine, you feel you're not being robbed. I know quite a few people from the US who feel that taxes are theft. Granted you agree they have the freedom to believe in whatever they want, how do you justify the fact that if they don't pay taxes, they will go to prison (not right away, but eventually, if they decide to resist, even if peacefully) or have their property alienated? Democracy isn't the answer, because they don't believe in one. If you say they have to pay because they use services a government provides, then it's also very debatable: they certainly may not want to pay for some of them (military?) and surely they don't have any alternative because government monopolistic behavior prevents any competition in certain sectors of the economy. Saying they have this freedom to believe in whatever they want when they don't have the same freedom to act according to their beliefs is identical to not granting them any freedom at all.


I justify that by pointing out that they are free riders. There are surely people living on backwoods property that pay little to no tax, because they are effectively not part of our various collective enterprises. Godspeed to them.

But if people want to enjoy the benefits of living in a city, state, and country, to participate in an economy, those benefits come with obligations. Sure, they may not want to pay for things. But if they can't get others to agree that the government should not do those things, or at least should run them on a cost-recovery basis, then it's too bad.

They certainly have the freedom to move to someplace without effective government. E.g., Waziristan or Somalia. They will be much freer there. Of course, warlords will be free to rob or kill them, so it may not be entirely to their tastes, but then, we aren't guaranteed perfect choices, just the opportunity to make better ones.


As a side note: you feeling that you're not being robbed has nothing to do with what actually happens, which is extracting money by a threat of force. You may not think about it this way, but it becomes painfully obvious once someone refuses to pay. To me, the refusal to see this is akin to a Stockholm Syndrome. No offense though, I did not mean to discard your argument using this comparison. I may add this is what it looks like to me subjectively.


I understand you believe you have some magic power to judge my motivations and behaviors based on zero actual knowledge, a little theory, and a lot of arrogance. To which I say: have fun. Just don't expect me, or anybody, to take you seriously when you're doing that.


In a democracy, the government and the citizens are not different parties; they are citizens and their incentive is that they have to live here as well even after they're no longer in power. To say governments never care about their citizens is silly, a government is not one mind, it's a collection of said citizens.


Theoretically. In practice, as soon as you get power, you have very little incentive to serve those who elected you and all the incentives in the world to make money from special interest groups. You can't fix that with any number of new rules and legislation. Instead, think about this: why do you need some people sitting in a pathetic building ruling over you? Why do you think society cannot do without them and what is it that only governments can do, but people and companies can't?


> In practice, as soon as you get power, you have very little incentive to serve those who elected you and all the incentives in the world to make money from special interest groups.

Special interest groups are citizens teaming up to push their agenda, those are people who elected you. Special interest groups are not inherently bad nor are they automatically against the will of the electorate. Many are actually representing the electorate.

> Instead, think about this: why do you need some people sitting in a pathetic building ruling over you? Why do you think society cannot do without them and what is it that only governments can do, but people and companies can't?

There you go again treating government and people as if they're different things. You're presenting a false choice, it's not government rule vs freedom from it, it's government rule vs local warlord rule. Power abhors a vacuum and government is our solution to that problem, it's how we live civilly together. It's not nor will it ever be perfect as no human system is, but it's vastly preferable to the alternative.

The idea that people can live peacefully without a form of government is just silly, someone has to enforce rule of law and it can't be someone's private security force or the guy with the most goons wins every time. Either the people choose a government or someone will choose one for them, or decide to rule himself.


In British Columbia you can defer your property taxes until the home is transferred (to anyone other than your spouse) or sold. That seems, to me, to be a much more fair and reasonable option than auctioning off these trivial amounts to the morally corrupt and destroying the lives of the indigent, elderly, or sick, as well as their families.


Ironically, a lot of houses owned by banks as a result of foreclosures ("REOs") are in turn getting foreclosed for failure to pay taxes and HOA fees. Banks were/are not equipped to manage the number of properties they own as a result of foreclosures and they lack the basic infrastructure to maintain these properties not limited to paying taxes and HOA fees, but violations of certain civil statutes like failing to maintain lawns that result can result in fines upwards of hundreds of dollars per day for continued violation.


This simply means that the banks should hurry up and auction the houses instead of sitting on them and waiting for their value to increase.


Agreed, but there is a lot of debate on this for the following reasons. The banks own so many homes, that there is an argument that they could flood the housing market with under priced homes which would slow the housing recovering by driving down the prices of all homes. Additionally, there is a lot of speculation that part of the $1.2 trillion stimulus packages went directly to the banks to account for the above argument and actually requires the banks to slowly release their inventory of homes in order to prevent flooding the housing market with under priced homes (again because that would continue to drive down value across the board).

All that said, as mentioned above I do agree with you, because assuming banks are keeping homes off the market this only artificially keeps home prices stable, and many of those REOs are failing into disrepair. In my opinion it is better to have ownership and people in homes, even at a short term cost of flooding the market with under valued homes. After all it is the banks who originally to the risk on these loans they foreclosed on and they lost.


Yeah because banks have no experience with things called Impound or Escrow accounts...


Large servicers (Bank Of America, Chase, Wells Fargo) already have a known history of mistakenly foreclosing on the wrong houses, fucking up tax payments from escrow accounts causing legal problems for the homeowner's, etc.

My father and step-mother both are mortgage underwriters. One is currently still underwriting, the other is currently working for the GSEs (Fannie and Freddie) forcing several large banks to eat the shitty mortgages they pushed on them.

I can not even begin to tell you how poorly managed these large servicers are. But heh, keep on thinking they know what they're doing. If they service your mortgage, I encourage you to keep a very careful on your note.


Not sure if you guys have noticed this "In 2006, he forgot to pay a $134 tax bill, prompting the city to place a lien on the home and add $183 in interest and penalties. His son paid the $317 bill in 2009, records show, but that wasn’t enough." His son did pay the tax later. I don't know how penalties/government fees are made and justified.


The writing is horribly obfuscated. What it means to say is that the original bill was $134. Presumably he received dozens of notices and warnings that it needed to be paid, before it was sold as a lien.

The lien holder would then have sent notices and warnings that the debt needed to be paid. Eventually after no response, it filed foreclosure proceedings in the court (at some significant cost). At that point, the son decided to pay the original tax bill, however the holder of the lien presumably wanted its legal costs paid before it would surrender the lien.

What happened next was very unjust. But would make more sense if the article was clear on the timeline of events.


This may not be the right place for this, but does anyone know who to contact about a similar instance? I have family members that experienced this and lost a house due to predatory lending practices, but there is little to no recourse or resources out there. If anyone has information about the Bank of America/Countrywide issues I would like to know about them.


What a clever disruption of the property tax industry!

But seriously, things like this are why we must not get too carried away focusing only on market opportunity. Some ideas are profitable, but socially disruptive. In this case, public policy is enabling predatory with very obviously antisocial results, but I think there are plenty of cases where the government isn't so directly involved and the results aren't so obviously destructive, yet antisocial, nonetheless. This is really addressed to the small but vocal minority that seems infatuated with profit-seeking, without concern for anything else.


Obscure program?? It happened all the time in the 1930's. If you couldn't pay your tax bill, your property was auctioned off on the courthouse steps.


Via private company operating for profit?


Issue is abuse of that system not the fact that it was by a private company operating for profit. Many prisons are run by for profit enterprises as well as hospitals. The way the program is run is the important thing not the type of enterprise handling the program.

Example: Small town with "speed trap" (not a for profit business) gives out excess tickets to raise money.


I hardly think citing prisons and hospitals is a ringing endorsement of the profit motive.


Reading something like that makes me very angry. What would be the highest punishment against people who do something like that? Personally, I would not have any problem to dish out the highest one.


"Give me your tired, your poor and we will make them homeless"


>owe $147

>you have to pay $5000

>you lose $197,000

How is this acceptable?


Well, the paper more or less put the article together because it isn't.


Its quite mind blowing isn't it? Never heard anything like it.


Property taxes are, effectively, rent paid to the local government by people who otherwise think that they own said property. Fail to pay it, and you get evicted. It is quite a racket already, but combine this with crony deals with private companies, and corruption shows its ugly face. It is all "legal", since the ones carrying out the scheme also happen to make the rules.


"No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws."

Why does that section of the 14th amendment not apply?


What makes you think the public tax sale took place without due process of law?

Straight from the article:

* Homeowners receive several warnings before their liens are put up at annual auctions.

* Once a lien is sold, owners have six months to repay the investor with interest. If that does not happen, the investor can move to foreclose.

The article even mentions the families getting their day in court over the post-tax-sale foreclosure.

I just realized I'm serial rage-replying on this article. You know that annoyed feeling you get when the news covers a subject you're familiar with? Well.


I don't mean to be taking the wrong side here but I'd be interested to know why didn't he didn't pay the money (It seems he was given warning). If he couldn't pay then I'm surprised he didn't sell his TV/remorgage his house/borrow money/ask friends or family to help or something. Perhaps I'm naive and he really couldn't do anything about this but it would have been nice if the article had covered this. Yes this is awful but I don't like the suggestions from some that the government simply shouldn't try to collect small debts. Surely no one would pay small debts they have then?


Maybe he forgot. Maybe he couldn't. Life is hard and complex. Not everyone is smart and clever. The weak side, for a debt of $40 gets all his properties auctioned and report a loss comparable to life-long savings. Totally reasonable and fair.

Agree with you, can't see anything wrong going on here too. (i'll state the obvious: i'm joking).

It's not simply a case that here we talk about: - People with dementia or major problems - Lonely - Most of the times, old enough to be completely invisible

And the state, private contractors and greedy individuals use them to refill their bank accounts. And it's perfectly legal. And some people, as you are doing now, simply try to justify it.

I'll tell you what is fair here: - He doesn't pay - Warnings should be issued - He should be given a greater amount to pay (i guess 100x the original amount should be enough) - He still doesn't pay - Insitutions try to understand why this person isn't paying - Take appropriate actions according to the situation. If the lack is anyhow justified (eg. person incapable of self-support) simply drop it and warn social services. Otherwise proceed to court.

Seems a lot more reasonable. But ehi, this would mean lot of effort. Why not just raping and looting the weaks. Keep up with the great job!


--- Institutions try to understand why this person isn't paying

How does a city like NY or LA scale this, when 1 or 2 out of hundreds or thousands is this type of situation. This situation only happens because a city doesn't have the manpower to do a social viability check on every tax lien.

I agree on principle, but the monitoring of elderly is not the role of government, but of community, neighbors, and family.


It says in the article that he was struggling with dementia. One highly possible reason is that he simply forgot.


In TFA, it's mentioned that he has dementia.


the article's title makes it hard for me as a non-us citizen to understand what foreclosure means in this context.

what i got from the article is this: due to the financial situation of the owner, a small unpaid tax turns due to unfair practizes into a larger debt of like $5000, which then allowed a judge to enforce the sale of the house so that unpaid taxes could be paid off.

now if the house was sold for the mentioned 197'000, does that mean that the owner at least got the proceeds minus the debt? the title suggests that this would not be the case...


From what I read:

1) Owner of the house owes a minor amount of taxes. In most of the anecdotes, the homeowners have either no mortgage at all, or otherwise have mostly equity (tiny % of the total value of the home owed). 2) Since the city technically has a lien on the home (or gets one?), they are able to then sell the lien to an "investor", who pays whatever the tax bill is. 3) The investor demands payment, and begins charging huge fees. 4) After 6 months or whatever, the investor forecloses on the house, which is essentially taking ownership (basically a "repossession") 5) The investor sells the house for market value, or whatever price they want. 6) Since the investor is NOT a mortgage company or otherwise holding a mortgage lien, but is holding a lien originated by municipal entity, there is no rule in place that says they need to pay the original homeowner the profit. Therefore, they keep all of the money, minus the tax bill they paid at the start.

In the end, the article implies that this company is buying liens for as low as $50, and then selling the houses out from under the homeowners for hundreds of thousands of dollars.

At least, that's what I understood.


thanks. unbelievable - modern government sanctioned robbery


Reading some of the comments here, everyone is talking about the laws being broken and how they need fixing but I don't think any amount of law writing can make up for the moral bankruptcy that has led to these situations and many others.

I think when people seek money they should ask themselves if what they are doing has any bit 'unethicalness'.. But who knows if those investors knew of the stories that made their investments possible.

We have the concept of a carbon footprint - what about an ethical footprint?


This is why we hackers should all be helping Google get their self-driving cars on the road. It could save so many lives if people could have the option of living in their car.


The kind of people who would be able to afford Google cars are not going to be the kind of people who might end up having to live in them.

And if they were, the government would just make Google drive the car to an impound or something, probably, and they'd take that as well.


The guy in the article wasn't completely moneyless, he just came up against the recurring costs of taxes/rent which can trip up the unorganized.

Google car expense is overplayed. In mass production and with competition the cost would go way down.

Also, if the government makes the 'homeless' drive to specific places out in the desert or something, that's better than the current situation where you're exposed to other homeless and dangerous people.

I actually wouldn't mind going 'homeless' for a while to save money on rent, but currently it's really dangerous to do so. Moving to low rent places is also usually more 'dangerous', especially with children. With a driverless car you can just take your family out into the desert or forest and pretend you're camping.

The current system of full-time rv-ing is quite hard because of parking restrictions and because sending kids off too school and getting groceries from out of town is hard, and because the rv's are too small. With self-driving rv's you can have a few of them to space out in.


Also, if the government makes the 'homeless' drive to specific places out in the desert or something, that's better than the current situation where you're exposed to other homeless and dangerous people.

But what if they're driving all of the homeless people out to the same spot in the desert? Cars, sure, are better than nothing but better still are cars the government can't use to expel or trap undesirables.

I'm sorry, but the idea of self-driving cars just creep me out.


Joke's on you: Silicon Valley localities like Palo Alto are passing laws that make it illegal to live in your car.


I especially like how the people who made the laws are in no way to blame... Nope once again, it's the lobbyists and the evil corporations, never the people who actually made the rule that allowed it to happen...made the rule to retain power.. No they are the good guys.


What would be your solution? To not sell the liens to private investors and instead and have the government try to collect on them? I.e., is your alternative bigger government?


Thanks, I will definitely put this on the plate as I decide to apply for US citizenship.


No need. This is a bizarre story and not the normal - which is precisely why you are reading about it on the news.

Basically everything you read about on the news is what almost never happens.


Can someone please tell me, why do US courts keep approving things like this?

Like they can't just foreclose a house without government approval. Why does the court approve the foreclosure in the first place over such a small debt?


I wouldn't be against this basically being a fraud committed by someone in the local government there. Who else would have the knowledge to have found the loophole? Who else could have abused it so well?


The six companies that dominate the auctions for those liens.

"When it was over, six companies had swept the bidding, snaring two-thirds of the liens, which totaled $5 million, on properties worth more than $666 million"


Does or shouldn't this contradict some law set by the government themselves? I need to do some research on the origins of taxes now. This seems unbelievable to me, I'm literally dumbfounded.


As an external observer I find it ridiculous that the recovery of small amount of debt -- to the government no less! -- involves foreclosing on someone's home.

WTF is wrong with you America?


I question if outrage articles like this belong on Hacker News. This is just a hot-button troll. Queue discussion regarding the decline of commenter quality on Hacker News.


And this is what happens when you privatise the tax man.


House of Fog shed light on this problem. it is tragedy.


I believe it was The House of Sand and Fog. And Ben Kingsley and Jennifer Connolly are amazing in it.


House of Sand and Fog. Yes, excellent movie. https://en.wikipedia.org/wiki/House_of_Sand_and_Fog_%28film%...


Maybe it's just me, but this reminds me a whole lot of all of the special pieces that the Times has released over the last year or so


I really love the UI. Big ass photo with magazine like header. And followed by article. Salute.


It's shit like this that makes molotov cocktails seem like rational behavior.


Strange he cannot afford 134. He has articles in his house he could have sold no?


Less than 1/10th of the way into the article, they make it clear that he has dementia


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