By Derk Wilcox
Mackinac Center for Public Policy
Should a local government be allowed to foreclose on a property for tax debt, then refuse to compensate the owner for any of the property’s value over the amount of the taxes owed? The Mackinac Center has filed a brief in support of the taxpayer in a United States Supreme Court case that would decide whether a process widely known as “equity theft” should continue.
Oral argument will likely take place later this spring in the case Tyler v. Hennepin County, No. 22-166. The case is creating an unusual alliance of free-market groups and many self-described progressives.
Geraldine Tyler lost her Minnesota condominium when county officials foreclosed over her property tax debt. But the county kept $25,000 of the proceeds in excess of her tax debt. For the government to keep more than is necessary to pay the tax debt is a taking of private property without compensation, Tyler argues, a process prohibited by the 5th Amendment. The lawsuit also charges the county with imposing an excessive fine or penalty, which is prohibited by the 8th Amendment.
The process was banned by Michigan’s state Supreme Court in the 2020 case Rafaeli v. Oakland County. “The purpose of taxation is to assess and collect taxes owed, not appropriate property in excess of what is owed,” the court ruled in Rafaeli.
Tyler v. Hennepin provides the U.S. Supreme Court with a chance to protect taxpayers nationwide. The case was brought by the Pacific Legal Foundation, which has partnered with The Mackinac Center Legal Foundation several times in the past. The Mackinac Center joined another group, the National Taxpayers Union Foundation, in filing a friend-of-the-court brief supporting Tyler and the Pacific Legal Foundation.
But Geraldine Tyler’s case has also drawn surprising support from groups that are not usually aligned. The Ralph Nader-founded Public Citizen, Constitutional Accountability Center, American Association of Retired Persons, the National Legal Aid and Defenders Association, and others have joined the case against equity theft.
These groups do not often support the same positions as those taken by limited-government and free-market groups. Perhaps this alliance highlights the egregiousness of equity theft, which disproportionately affects the poor and those who have more trouble obtaining legal counsel. This tax-collection practice robs people of the equity they have built up in their homes, and it should be ended.
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Derk Wilcox is the senior attorney at the Mackinac Center for Public Policy.
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