Explore tougher tax penalties

Talk about a sweetheart deal. Many Utah businesses and some individuals are, in effect, availing themselves to low-interest "loans." Better yet, there are no loan applications, fees or waiting. The beneficiaries of this "lending" program are individuals or entities that are delinquent in paying local property tax.

It's not illegal. And there appears to be no governmental entity clamoring to raise penalties and interest for late payment, even though taxing entities are the losers in these arrangements. Local school districts, which receive the largest portion of local property taxes, are particularly hard hit. Their losses could potentially mean higher taxes for others.

A new analysis by Deseret Morning News reporters Lee Davidson and Leigh Dethman shows Delta Air Lines is the biggest property tax delinquent, owing $4.3 million. Another carrier, Northwest Airlines, owes $275,000. Until both airlines emerge from bankruptcy, Salt Lake County is in limbo as far as collecting the past-due taxes.

Although the airlines' delinquent tax is considerable, developers, real estate companies and construction companies owe a combined $9.6 million in back property taxes to Salt Lake, Davis and Utah counties. Some of these businesses opt not to pay their back taxes knowing the county must wait five years to seize and auction the property to collect the taxes owed. Instead of paying taxes with cash on hand, they float on the money they would have paid.

Utah assesses some of the lowest penalties and interest rates on past-due taxes nationwide, which enables some of this activity. Under Utah's state formula for 2006, a 2 percent penalty is assessed on any taxes not paid by Nov. 30. Taxes not paid by Jan. 16 accrue interest at 11.25 percent retroactive to Jan. 1. Contrast that to other Western states, which charge interest rates up to 16 percent and penalties as high as 22 percent.

Obviously, any tinkering with penalties and interest rates could have unintended consequences. There needs to be a reasonable accommodation to protect people who have fallen on hard times and cannot pay their property taxes. But tax policy should also discourage businesses and others from enjoying low-cost "loans" at the expense of taxing entities, such as local school districts.