In 1981, interest rates climbed to 20 percent, a perch so high that it became profitable for some people to invest their property tax dollars rather than pay their bills. The following year, the Legislature responded by passing a law that affixed hefty penalties on delinquent property taxes to boost the collection rate.
It worked, but times have changed.
Interest rates are at historic lows, and the punishment for delinquent property taxes has become excessive: 11 percent in penalties on top of 12 percent interest on the unpaid amount. Spokane County Treasurer Rob Chase urged the Legislature to drop the penalties, but was rebuffed. The original bill delayed the penalties for one year, but lawmakers ultimately preserved them as is.
However, the Legislature did adopt a provision that allowed counties to accept partial payments of property tax bills. Before that, only full payments were accepted, which forced some cash-strapped people to sell their homes or go into foreclosure to pay the taxes and penalties. The partial-payment bill, which was recently signed by the governor, leaves the decision to each county treasurer, and Chase is on board.
The flexibility of partial payments provides breathing room for people who have fallen on hard times, whether they’re hit by health issues or unemployment. As Chase told The Spokesman-Review, “Their misfortunes shouldn’t be a cash cow for the county.”
Last year, the Legislature passed a law allowing for partial payments if people signed an agreement with the treasurer’s office. Chase said 66 people went on a partial-payment plan, but the deal was off if they missed one payment. Now, there’s more flexibility.
Lawmakers deserve credit for allowing counties to work with struggling taxpayers, but financial sanctions – as high as 23 percent per year – are the real barrier. In other contexts, the state would consider that excessive.
As Chase notes, the state statute on usury (excessive interest rates) defines it, in part, as “twelve percent per annum.” But the statute offers an exemption for “interest, penalties, or costs on delinquent property taxes.”
So when some lenders exceed that rate – there is a long list of exemptions – it’s considered usury. When government does, it’s not.
In testimony against the delay of penalties, a representative of the County Treasurers Association said counties have come to rely on the money raised from delinquent payments. In other words, if everyone paid on time, counties would have to adjust budgets downward.
Government should work with people to comply with laws, not bank on them being broken. Next year, the Legislature should look at the penalties, because limiting them would provide even greater assistance.