Risk of Becoming Foreclosed Houses due to Unpaid Taxes

Tens of thousands of homeowners across the country are in danger of seeing their homes become repossessed houses not because of bank foreclosure, but because of tax seizures, based on data contributed by county and city tax collectors to their national organization.

Failure to pay residential property taxes do not only cause foreclosure houses on the part of the owners, but also cause multimillion shortfalls in the budgets of local governments. In turn, community services supported by local governments such as schools, fire departments, police and social services suffer.

Kenneth Parrish, treasurer of Michigan’s Kent County and head of a national organization of tax collectors, said most tax collectors across the country expect a substantial increase in the number of defaulting taxpayers and a substantial decline in property tax collections in the next several years.

As the unemployment rate rises, the number of unpaid property tax bills is expected to soar.

Tax collectors from around the country have been noticing the increase in unpaid tax bills. Property taxes are collected by local governments, so there is no single data available to measure the number of homeowners and businesses who have failed to pay their property taxes.

In Cuyahoga County where Cleveland is located, almost eight percent of taxpayers failed to pay their property tax bills in July, which is double the delinquency rate in 2005. Cuyahoga finance official Robin Darden Thomas said the county has been struggling to collect around $400 million in back taxes.

In Charleston County, South Carolina, over 13,500 taxpayers did not pay their annual property tax bills payable in March, an increase from around 10,000 delinquent taxpayers in 2007. County collector Mary Scarborough said that the county has also a lot of foreclosed houses, as people who are not paying the banks are not paying the government.

In Lee County, one of the counties most battered by foreclosed home, over 43,000 taxpayers did not pay their tax bills payable this year. The number marked an increase from the 31,000 delinquent taxpayers in 2007.

Meanwhile, Nashville tax official Charlie Cardwell said approximately 5 percent do not pay their tax bills, but he and other country officials expect an increase of 3 percent in the number of defaulting taxpayers.

According to tax collectors, real estate tax laws vary among local governments, but they said they turn delinquent residential properties into foreclosed houses if taxes are unpaid within 2 to 3 years.

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