OPINION: Michigan’s Supreme Court Is Taking On Predatory Property Taxes

Larry Salzman | Pacific Legal Foundation

In 2013, Uri Rafaeli learned that he underpaid the 2011 property tax bill on his modest home in a Detroit suburb. He attempted to pay the difference but miscalculated the interest due, unknowingly paying it $8.41 short. What came next was a shock: Oakland County seized his property for the deficiency, which had grown to $285 with penalties and interest. It then quickly auctioned his home off to someone else for $24,500 — and kept every dime for itself.

Rafaeli has been in court — and losing — ever since, trying to get some relief. He doesn’t dispute that he made a mistake. He knows the county can’t let people default on their tax bills with impunity. But he can’t conceive of any principle of justice that would allow the government to take his entire home and all its equity—nearly 3,000 times the debt he originally owed — without returning the surplus cash to him.

In good news for Rafaeli and property owners throughout Michigan, the state’s supreme court announced that it will hear his case. The court will decide whether the county violated property rights protections in the U.S. or Michigan constitutions by keeping more of the proceeds from the tax sale than needed to satisfy Rafaeli’s debt.

Any reasonable government official could have recognized that Rafaeli’s tax deficiency was a simple mistake. While he underpaid those 2011 taxes by $8.41, he paid in full his taxes for 2012, 2013, and the period in 2014 before the home was seized. He plainly intended to — and in every subsequent year did — pay his full tax bill.
On those facts, one might be tempted to think this is an exceptional case of government incompetence, but Rafaeli is only one of tens of thousands of victims of Michigan’s predatory tax foreclosure machine.

A blockbuster piece of investigative journalism by Detroit’s public radio station WDET and Bridge Magazine documented the same abusive tax foreclosures in counties throughout Michigan, netting hundreds of millions of dollars in “surplus” revenue over the past decade to fill holes in local budgets. For instance, neighboring Wayne County seized more than 25,000 properties in 2017 alone, leading the report’s authors to conclude that “the county now relies on property owners’ misfortune to balance its budget.”

Courts have taken notice, but until now Rafaeli and similarly aggrieved property owners have been left without a remedy.

Shortly after Rafaeli lost his home, he sued in federal court but was told he had to go to state court instead. The federal trial judge noted in passing, however, that Rafaeli suffered “a manifest injustice that should find redress under the law.” In another similar case involving the seizure of a church property, a federal appellate court called Michigan’s behavior a “gross injustice” likened to “theft.” In yet another federal case, also dismissed, the judge declared Michigan’s abusive tax regime an “unconscionable” system while lamenting that no relief is available in federal court.

Taking the advice of the federal courts, Rafaeli sought relief in state court. He has fared no better up to  now. In an appeal from his loss in state trial court, the panel of appellate judges determined that they could not return to him the excess funds collected by county because Rafaeli “acted contrary to the welfare of the state by failing to pay [his] taxes.” That result moved one of the appellate judges to write a separate opinion, agreeing that the decision was correct as a matter of precedent but calling it a “gross injustice.”

Only Michigan’s high court now has the power to declare this “gross injustice” unconstitutional. It must do so, putting an end to an “unconscionable” system now.

Larry Salzman is a senior attorney at the nonprofit Pacific Legal Foundation, which represents Mr. Rafaeli in the Michigan Supreme Court.


The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.

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