When Taxation Is Eminent Domain

Questions are raised of whether the power of taxation is a valid power. The 16th Amendment resolves the issue for Federal income taxes; allowing the Federal Government to tax income in order to maintain fiscal stability. However, when it comes to taxes, one has to wonder whether the taxes, or a procedure, can be so onerous that it affects itself of "a" taking. The City of Detroit is but one example. The City has a taxation system in which only the title holder of real property receives the tax bill. When property is sold on land contract, there is no compulsion on the land contract purchasers to pay other than the purchasers will be forfeited out by the tax process.

The underlying problem is that the tax assessments, (which are allegedly based on value) often has no relationship to the value in the market. The 2008 housing crises created specially negative affects in a community where mortgage markets are no longer available. Detroit is among the prime examples in the country.


When there is no available mortgage market, land contracts do not require a pro-rata monthly payment into the federally regulated lending institution. The institutions hold the money in trust for the taxing authorities and tax amounts are withheld and promptly paid to the taxing authorities.

Frequently, the taxes on homes are far greater than the land contract payments. This has rendered Detroit in the horrible situation of forfeiting thousands upon thousands of properties because of back taxes.

Further exacerbating the problem is that the State of Michigan has a requirement that unpaid taxes are charged at the rate of 18%, a clearly usurious rate otherwise, but valid because allowed (and mandated) by the State at that amount.

The procedure for appealing a tax assessment further adds to the problem. An owner must first be heard by the Tax Assessment Appeal Board. Generally, the Board gives little or no relief. Upon rejection by the Board, the owner then has to address an appellate body, generally a community council or appointed delegation of the council. This is likely to also be met with total disinterest in applying the fair market value to a property. Finally, the owner must then appeal to the Michigan State Tax Tribunal (or a similar tribunal in other States) to obtain relief. This procedure can take a lengthy period of time, and is confusing and a difficult process because owners generally do not have the financial capability to appropriately challenge an incorrect assessment.

One has to wonder whether this is not a "taking" of property as contemplated by the State and Federal Constitutions.