A Michigan Man Underpaid His Property Taxes By $8.41. The County Seized His Property, Sold It—and Kept the Profits.

[Muda69]

https://reason.com/2019/11/06/a-michigan-man-underpaid-his-property-taxes-by-8-41-the-county-seized-his-property-sold-it-and-kept-the-profits/

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An 83-year-old retired engineer in Michigan underpaid his property taxes by $8.41. In response, Oakland County seized his property, auctioned it off to settle the debt, and pocketed nearly $24,500 in excess revenue from the sale.

Under Michigan law, it was all legal. And hardly uncommon. 

Uri Rafaeli, who lost his property and all the equity associated with it, is just one of thousands of people to be victimized by Michigan's uniquely aggressive property tax statute. The law, passed in 1999 in an attempt to accelerate the rehabilitation of abandoned properties, empowers county treasurers to act as debt collectors. In the process, it creates a perverse incentive by allowing treasurers' offices to retain excess revenue raised by seizing and selling properties with delinquent taxes—even when the amount owed is miniscule, and even when the homes aren't abandoned or blighted at all. 

Organizations representing property owners like Rafaeli say the practice is unconstitutional, inequitable, and unreasonably harsh. They call it "home equity theft"—a process that's a close relative to the civil asset forfeiture laws that have been used by police departments to similarly deprive innocent Americans of their property without due process. They are now asking the state Supreme Court to restrict the practice. 

"Michigan is currently stealing from people across the state," says Christina Martin, an attorney with the Pacific Legal Foundation, a nonprofit law firm now representing Rafaeli and other homeowners in a class-action lawsuit that will go before the Michigan Supreme Court in early November.

"Counties have been authorized to take not just what they are owed, but to take people's life savings."

....

Worse, the survey found that aggressive use of home equity forfeiture was leaving the city with more vacant properties, not fewer. "In theory, the annual tax foreclosure auctions are intended to take properties that are neglected and not generating tax revenue, and sell them to owners who will pay taxes and put the properties to productive use," the Quicken Loans Community Fund report concluded. "In practice, most Detroit homes that have been tax foreclosed do not return to productive use. Instead, speculators who purchase cheap property at auction allow it to deteriorate without paying property taxes, leading to further depressed home values and blight."

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In Michigan, however, the practice of seizing homes over tiny underpayments of property taxes is likely to remain in place unless the courts step in. A bill introduced in the Michigan state House by Rep. Gary Howell (R–Lapeer) to reform Act 123 collected a handful of co-sponsors this year but did not receive even a committee vote. 

Which means there will be more people like Uri Rafeali, who lost a home over an $8.41 mistake. His property, bought as an investment, is valued at an estimated $136,000. The penalty imposed by Oakland County was more than 8,000 percent greater than the underlying debt. 

But today, while the legal battle over its fate plays out, the house sits empty. It generates no tax revenue for the city or county. It earns no money for Rafaeli or his wife in their retirement. 

"The Constitution was written to prevent the government from violating a right that preexists the Constitution," says Martin. "If this can happen to multimillionaires and to the poor, to the elderly….If this can happen to Mr. Rafaeli, it can happen to anyone."

Sickening.  Yet another gross example of government's power over the individual.