State Representative John Rogers (D-Birmingham) is pushing to reform Alabama property tax law which currently charges a convoluted array of interest on any unpaid property taxes:
Here's how it works: If a property owner fails to pay taxes by the Dec. 31 deadline, the property is sold at a tax auction the next spring. Buyers are mostly institutional investors lured to Alabama by the 12 percent interest they can earn on money they pay to buy the tax deed.Rep. Rogers would like to see the amount of intrest dropped to 1%:
Investors can earn interest on the amount of tax owed, and also on the amount of overbids up to 15 percent of the value of the home.
Thus, when a property owner tries to redeem the property, he or she must pay not only the unpaid tax and 12 percent interest on that, but also 12 percent interest on the overbid, which may be many thousands of dollars.
For example, one Vestavia Hills home in the 2005 tax auction sold for $2,279 of unpaid taxes, plus an overbid of $81,000. To redeem the tax deed, the homeowner had to pay 12 percent interest on $40,620 of that overbid -- 15 percent of the value of the $270,800 home.
Rogers said he was thinking of a bill to set the interest penalty at 1 percent.
"This is a bill I can get Democrats and Republicans together on," he said. "I'm going to put the hammer on it.
"Good God almighty," he said, "it's wrong!"
