Finley: State must end 'gotcha' tax seizures
Government shouldn't profit from its citizens' mistakes, or their misery.
But Michigan counties are making out very nicely by playing "gotcha" with taxpayers who commit errors — oftentimes very tiny ones — on their property tax payments.
State law allows counties to seize property for unpaid taxes, sell it at auction and keep all of the proceeds, even if the sale amount exceeds the owner's debt.
That's how Wayne County managed to lift the live savings of the Perez family of New Jersey. In 2013, Ramualdo Perez took the $60,000 he had saved from his job in the fashion industry and invested it in a rundown house and four-unit apartment building in southwest Detroit.
His ambition to become a landlord was unattainable in New Jersey because of the high cost. So he chose Detroit, where he has family, and spent three years driving back and forth from the East Coast to rehab the house and apartments.
But when they visited Detroit in the fall of 2017, they were told by their tenants that someone else was collecting the rent. That's when they learned that their property — all of it — had been foreclosed on by the Wayne County treasurer for unpaid taxes and sold, without their knowledge.
The family says they never received the tax bill Wayne County says it sent them; that the county neglected to send notifications to their correct address in New Jersey, and that the foreclosure notice was posted in an inconspicuous spot on their property, rather than on the front door.
When they sued, the Wayne County Circuit Court ruled the treasurer had met the minimum due process obligation.
They tax auction sale amount: $108,000. The neglected tax bill: $144, plus $356 in interest. Wayne County's profit: $107,500.
The Perez family was screwed even more royally than was Uri Rafaeli, whose property, valued at $24,500, was seized and sold by Oakland County in 2014 to settle an $8 tax debt.
Rafaeli's case is now before the Michigan Supreme Court, which will hear it in the fall, and hopefully put an end to this highway robbery. The Perez family filed a new lawsuit in Wayne County this week asserting its constitutional rights were violated by the seizure.
"When valuable property can be taken to settle a small debt, it creates a perverse incentive for the counties to foreclose," says attorney Christina Martin of the Pacific Legal Foundation, which is representing both Rafaeli and the Perezes.
Michigan is one of only 12 states that allows counties to keep the proceeds from a tax sale that exceed the debt. Counties here do have other options — they could garnish rent payments or seize other assets to satisfy small debts.
But it's more lucrative for treasurers to sit vulture-like and watch for taxpayers to make stumbles that will fatten county treasuries.
The state Legislature shouldn't wait for the Supreme Court to rule. It should put an end to this predatory practice, and while it's at it, require far more diligence by counties in tracking down taxpayers to notify them their property is at risk.
Government should be there to help its citizens, not exploit them.
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