Local Government Property Tax Amnesty Programs: Structures and Themes

By Ross, Justin M. | Public Finance and Management, April 1, 2012 | Go to article overview

Local Government Property Tax Amnesty Programs: Structures and Themes


Ross, Justin M., Public Finance and Management


ABSTRACT

While the use of tax amnesty programs has been commonplace for decades among sub-national governments in the United States, historically these offers have not been extended to delinquent real property taxes. There have been 29 property tax amnesties offered by local governments in seven states, however, and most of these programs have appeared in just the last 10 years. This paper presents data on these programs, and then provides a narrative analysis of these cases by drawing upon archival data from press releases, media reports, comprehensive annual financial reports, city council minutes, and policy memos. Several themes emerge from this study revealing the role of real property tax amnesty to be more diverse than their state counterparts. The conclusion summarizes these lessons and offers some considerations for policy makers.

1. INTRODUCTION

Traditional tax amnesty programs represent an opportunity for taxpayers with delinquent or unknown liabilities to voluntarily report themselves to the authorities. In revealing themselves, tax evaders enter into a contract with the government that includes a waiver of any criminal charges, as well as usually some forgiveness of penalties and interest which had accrued against their lia-bility. In the United States, these programs are typically viewed as a mecha-nism for generating revenue, while improving the tax compliance environment by making it easier for citizens living outside the tax system to (re)join the tax rolls.1 There have been 117 tax amnesty programs executed by American states since the early-1980s, and countless local governments offering amnesty for liabilities accrued under other tax instruments, in addition to amnesty pro-grams for other revenue sources like library fines and parking tickets. Only with rare exception, however, have the local government amnesty programs extended this forgiveness to delinquent liabilities on real property taxes. Just the past three years alone have been witness to cities like New York, Denver, Tuscon, New Orleans, and Cincinnati offering amnesty on unpaid taxes except those on real property.2 The 1980's and 1990's each saw just one city in each decade offer amnesty on property taxes, but 26 such programs have been exe-cuted since 2000 across six states.

If considering tax amnesty in its traditional role as a revenue generator and compliance device, it is not the relative lateness of local governments to ad-ministering these programs for unpaid real property tax liabilities that is sur-prising, but the fact that they have emerged at all. The administration of the real property tax (RPT) differs from other tax instruments in key ways relevant to the traditional purposes of amnesty programs. Unlike mobile taxpayers whose presence and true taxable assets may be unknown to the government, a property tax lien is assigned to the parcel of property whose taxable value is determined whenever the local government decides to conduct property reas-sessments. After decades of property tax administration, zoning, and federal registries for land and water regulations, local governments have detailed rec-ords of land titles and records for the properties within their territory. Since the tax holds first lien against the property in the event of any ownership ex-change, the opportunity for non-compliance and evasion is extremely slim; Should an owner disappear or refuse to remit the tax, the government can seize and sell the property via tax auction.3 In short, unlike other taxes the local government does not need to rely upon significant levels of voluntary compli-ance in order to collect the full RPT levy. As observed by Jensen in 1931 (su-pra note 17, p. 307):

It should be a relatively simple matter to collect the [property] tax, once it has been extended on the roll and a proper warrant has made it a legally collectible claim. On paper, at least, the collector has adequate legal authority; the tax is usually prior to all other claims; barring fraud and illegality in the levy and as-sessment, nothing should stay the collection. …

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