NTUF’s Taxpayer Defense Center today filed an amicus curiae (“friend of the court”) brief in the U.S. Supreme Court defending the rights of citizens from excessive tax fines. In Pung v. Isabella County, Michigan, we write to assert that tax sales need to be held to the proportionality standards of the Eighth Amendment’s Excessive Fines Clause. In short, a family shouldn’t lose their house (and get no equity back from the government) for a mere $2,200 in tax debt.
The facts in Pung are a common tale. The Pung family home was sold at auction by the county to settle a $2,200 tax debt. There is real dispute as to whether the Pungs owed that money to the County in the first place based on Michigan’s homestead exemptions for a family’s home. In any event, Isabella County took the home and auctioned it off to pay that debt. The auction, though, was not well advertised and poorly attended, resulting in a mere $76,000 winning bid. The County took its cut to satisfy the taxes and the buyer immediately flipped the house for its true worth: $194,400. The question is how much is owed to the Pungs and under what right: the Constitution’s Fifth Amendment Takings Clause or the Eighth Amendment Excessive Fines Clause?
Our amicus brief focuses on that second question. We explain that, in effect, the Pungs lost their home for less than 1% of its value in property taxes. No matter how one looks at it, this case involves an excessive fine levied against the Pungs—and thousands of others across the country.
The ban on excessive fines is a fundamental right, predating the Constitution all the way back to the Magna Carta. In our brief, we trace that history through English law to the debates surrounding the American Revolution to the adoption of state constitutions after Independence. Being free of excessive fines was a key right of any English subject, and the Founders carried on that tradition though the federal and state constitutions.
We also look at how the Supreme Court has handled civil fines (as opposed to criminal sanctions) in this context. Under prior cases like United States v. Bajakajian and Austin v. United States, a fine cannot be “grossly disproportional” to the offense and the aim must be “purely remedial.” Here, Isabella County’s tax sale and reluctance to pay fair market value violates the Eighth Amendment. The tax sale was disproportionate to the amount of back taxes due and the County got to keep far more than what was needed for its remedy. This situation is the perfect example of an excessive fine. Think of it this way: the Pungs lost their home for about the cost of a Peloton bike.
We also argue for the Court to overturn Nelson v. City of New York, a 1956 case where New York City confiscated and sold a property for $7,000 to satisfy $65 in unpaid water bills, and kept all $7,000. The Court held that the homeowner was tardy in asking for their money back using a state process, but officials have interpreted this decision as widely endorsing confiscations. Nelson was also decided prior to the Excessive Fines Clause’s incorporation and is the reason lower courts are reluctant to rule that state and local governments violate the Constitution by seizing and selling property for unpaid taxes and returning very little value of the property’s worth to the distressed taxpayer. The Court can overturn Nelson in the Excessive Fines context and clarify to lower courts that these predatory tax sales violate the Constitution.
The Pung case has company on the Court’s docket. The Justices were already considering multiple property tax cases brought by the Pacific Legal Foundation, which represented Ms. Tyler to change Minnesota’s home equity theft law in the landmark case Tyler v. Hennepin County. We note for the Court that, if it resolves this case as saying Isabella County issued an excessive fine, and overturns the Nelson case, then the Supreme Court can dispose of a whole host of cases currently pending on its docket.
The case is Pung v. Isabella County, Michigan (U.S. No. 25-95).