Friday, March 6, 2015

Six lawmakers want lower interest charges on delinquent taxes

Interest on past-due property taxes accrues at a rate of 1 percent per month. Six state legislators are sponsoring House Bill 265 which would reduce that rate to one-quarter of one percent per month, or 3 percent per year.

The bill is somewhat favorable to delinquent taxpayers, but it also runs the risk of reducing the incentive to pay taxes on time. In Decatur, we don’t count on interest charges being a significant source of revenue. To put it another way, the purpose of charging interest isn’t really about raising revenue. The purpose of charging interest on late payments—and this is true with accounts receivable in general, not just taxes—is to induce debtors to pay off before additional interest accrues. Charging interest is a technique to help collect the principle. Interest charges of less than one percent may not have the impact of a full percent.

But it’s probably all a moot point because the bill appears unlikely to pass this year. HB 265 hasn’t been marked up the Ways & Means Committee and hasn’t been scheduled for a floor vote. The Atlanta Journal-Constitution gives HB 265 only a 12 percent chance of passing this session.

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