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Tax Lien Certificates

Much is made of the certainty of death and taxes. Death needs no explanation; taxes are more complicated. State and local governments need taxes in order to fund programs that are essential to the proper functioning of the community. If these revenues were to stop, the basic services that all local communities provide its members would stop as well, sacrificing not only the value of those services, but also the jobs that they sustain. The sale of tax lien certificates to private investors is one way for state and local governments to ensure that they receive the money they need to function. For this, it is logical to conclude that it would be beneficial for all state and local governments to adopt such a program.

Throughout the United States, local governments must contend with millions of dollars in overdue or outstanding property taxes. These taxes are designed to fund daily services that are indispensable for any local community. The police department, the fire department, the welfare system, and the school system all receive revenue that is collected in the form of property tax. When property ownersÆ default on their legal obligations to pay their property taxes, the money that would otherwise go to funding community projects instead becomes delinquent (Strowder 1).

It is at this stage that some local and state governments have decided to create and sell tax lien certificates to private investors. This lien is secured by the real estate property it is inextricably tied to; the investor, in purchasing the tax lien certificate, is volunteering to pay someone elseÆs property tax. The lien, held at a fixed interest rate, is now nearly certain to yield high returns for the investor. Unfortunately for the property owner, interest on tax liens is very highùin most states starting at around 12% with the potential to reach 50% (4 Tax Lien Certificates).

When the property owner pays his back taxes at this huge...

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Tax Lien Certificates. (1969, December 31). In Retrieved 22:01, July 01, 2022, from