Most Americans probably know that Uncle Sam, as part of its response to the coronavirus pandemic, has delayed the federal income-tax filing and payment deadline from April 15 to July 15. States generally are following that lead for their own tax deadlines. What generally has not happened, however, is a similar forbearance by local-government property-tax collectors.
Thankfully, there are early signs of movement in that direction. In Washington state, where an emergency declaration by Gov. Jay Inslee has provided county treasurers with flexibility, a number of compassionate tax collectors have seen the light and moved their property-tax deadlines back. And in California, a state Assembly member has proposed closing tax-collection offices, as at least one county already has done, effectively delaying when property taxes are due.
Let’s be honest here: Property-tax obligations are non-negotiable. They are a lien on the property and fully enforceable. And unlike income- and sales-tax revenues, the payments will not evaporate forever because of COVID-19 stay-home orders and unemployment.
At worst, the local governments that depend on these revenues to sustain their operations can quickly issue short-term tax anticipation notes (TANs) to bridge their funding gaps, knowing that the taxes ultimately will be paid. TANs are fully secured and are typically the highest credit quality in the municipal bond market. Interest rates on TANS are about 1 percent right now, even lower in many cases. So what we’re really talking about is not the principal but rather the interest and penalties that normally accrue for late payments. And those penalties are usually brutal, often double-digit.
In Washington state, the first semi-annual property tax deadline is April 30. In California, it’s almost uniformly April 10. So time is of the essence for state legislators, county and city treasurers, and state tax boards to wake up to the crisis now impacting so many households. While tens of millions of Americans will be receiving checks under the $2 trillion economic relief plan enacted by Congress, those federal checks won’t arrive before April 10. Meanwhile, unemployment-compensation processing is clogged with record-shattering numbers of applicants.
Across the country, it’s essential that local and state leaders move quickly to allow later property-tax payments, without the stiff penalties, for two or three months. The impact on local finances won’t be as bad as many might think: Many property owners will have already paid, so there is revenue in the till, and many others pay their property taxes through mortgage escrow, so that money is also already on hand or on the way. Late-payment penalty relief therefore does not need to be universal — just for those who pay directly and need a little more time. If you feel the need to require “hardship claim” paperwork, so be it.
This is not rocket science. Get it done, please. Americans are all in this together, right?
Governing's opinion columns reflect the views of their authors and not necessarily those of Governing's editors or management.