Inequities Beyond Surplus Equity: Fixing the Limited Remedies of Tyler

Abstract

When the Supreme Court declared “home equity theft” policies a Fifth Amendment Taking in Tyler v. Hennepin County, a diverse coalition celebrated its holding. To the unsuspecting, the Tyler decision appears to be motivated by fairness in returning surplus equity to an elderly African American tax-delinquent homeowner. But when low-income homeowners lose their greatest asset due to even minimal tax debt, returning a fraction of the value (the surplus) is hardly an adequate remedy. This Article refocuses attention away from the invalidation of “home equity theft” policies to larger inequities in the U.S. property tax system that have a disparate impact on communities of color—essentially robbing them of their greatest asset for even minimal tax debt.

The nationwide trend of over-assessing property taxes in Black and Latinx communities and then adding exorbitant penalties and fees makes redemption out of reach for most low-income homeowners. This Article offers a step-by-step analysis of the three stages of tax delinquency: over-assessment in communities of color leading to tax default, tax lien sales, and tax foreclosures. As state and local governments have created the problem, they too must remedy it. It was a judicial overreach for the Tyler Court to strike a state’s tax policy as a Taking; this does more to further the “property rights” movement and limit government’s ability to tax than to promote “equity.” The legislative reforms suggested in this Article would better enable homeowners to exercise their right of redemption to stay in their homes, obviating the need for the return of surplus. This should be the prime focus of future reform efforts, beyond complying with the new Tyler standard.

Keywords: Tax equity, Property taxes, Tax foreclosures

JEL Classification: H20, H26, K11, H82