Wednesday, Aug. 19
Posted 2 p.m. EDT
Who would have thought that the IRS is more humane than local tax collectors? Not me.
But that's apparently the case. Some local jurisdictions are turning to private debt collection, a system the IRS had the good sense to do away with earlier this year.
A growing number of counties, school districts and cities, however, are selling their delinquent tax bills to private companies.
At first glance, it seems like a win-win.
Local governments get money without having to hassle with collection efforts. Investors in the systems get a potentially high return (albeit at a higher risk) that for many is more appealing than other investment options, especially now that CDs rates are virtually zero and the stock market is still trying to find its footing.
Of course, the big loser is the delinquent taxpayer.
Now I'm not saying that folks shouldn't pay their property (and other) tax bills. But in this economy, taxes are understandably being bumped to the bottom of the must-pay list.
That's where the private tax lien collector creates more problems. Whereas a local tax assessor-collector might be more willing to listen to a neighbor's tale of financial woe and work out a deal, not so the disinterested third party who is just in it for the money.
Or as a county official in Ohio told The New York Times, "In the beginning, you're getting this immediate windfall of cash. But when you think about abandoned properties, foreclosed properties -- the cost to the community is far more expensive than the short-term benefits."
What's more amazing to me is that the Internal Revenue Service figured this out.
Not only has the federal tax collector stopped using private debt collectors, IRS Commissioner Doug Shulman has instructed his staff to talk with delinquent taxpayers to help them meet their tax obligations in a way that doesn't cause them even more financial problems.
Which brings me back to my opening question: Who would have guessed that the IRS has more of a heart than local tax collectors?