New Report: Black families pay significantly higher property taxes than white families
Recent events have brought to light, yet again, systemic discrimination. Put simply, ending slavery did not end discrimination as the Jim Crow laws showed, and ending Jim Crow laws some decades ago has not ended discrimination either. As Time reported, “Centuries of racist policy, both explicit and implicit, have left black Americans in the dust, physically, emotionally and economically.” So while we are making progress, people of color are still not on equal footing due to systemic discrimination. After starting the race a mile behind, many of our fellow Americans have to run it now with a weight on their shoulders.
The federal government within the Executive Branch (i.e., the President) includes an Agency called the Equal Employment Opportunity Commission (“EEOC”). The EEOC enforces “federal laws that make it illegal to discriminate against a job applicant or an employee because of the person’s race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, age (40 or older), disability or genetic information.” The EEOC defines systemic discrimination as involving “a pattern or practice, policy, or class case where the alleged discrimination has a broad impact on an industry, profession, company or geographic area.”
Discriminatory Tax Assessments as Systemic Discrimination
Paraphrasing a recent story that brought this to our attention…..Reviewing closing documents while completing a property sale a year ago, the closing agent asked a family, why are your property taxes higher than all these other homes in your development? The houses are all the same, just different models. Some even had improvements that would presumably increase the value of the homes and thereby subject them to higher taxes. What was different about this home? The owners’ skin color for one. A privileged response to this story was, no way! Today? Can’t be. Come on. Indeed, as the Washington Post noted in a recent article.
Economists Troup Howard of the University of Utah and Carlos Avenancio-León of Indiana University published a working paper in June 2020. The title is, “The Assessment Gap: Racial Inequalities in Property Taxation” They “looked at more than a decade of tax assessment and sales data for 118 million homes around the country.” As Andrew Van Dam of the Post reported, “State by state, neighborhood by neighborhood, black families pay 13 percent more in property taxes each year than a white family would in the same situation. . . .”
Racial Inequalities in Property Taxes
People often include home ownership as part of the “American Dream.” One of the reasons not all Americans celebrate the dream with the same vigor is because they don’t experience it the same way as others.
Home owners pay property taxes, which are an ad valorem tax. This means government bases the amount of tax on the value of the home. As the aforementioned economists explained, “[p]roperty tax bills, however, are generated by applying the locally determined rate of taxation to an assessed value, which is a local official’s projection of market price.”
The Post reported that the economists found in their study that in “almost every state, property tax assessments were higher in areas with more black and Hispanic residents.” The differences were not just due to differences in the buildings or land, but the racial composition of the neighborhood. “The gap between white families and minority households remains large — 10 percent — when you combine data for Hispanic and black families.” As one article explained, “One reason for the disparity: Minority homeowners are less likely to appeal their assessments, and less likely to win them when they do.” At KBA, we do not handle tax appeals, but we know attorneys who do and will help anyone find these attorneys if they cannot on their own.
A Long History
The Pew Institute noted that “[f]or decades, white tax assessors placed a heavier tax burden on Black residents by intentionally overvaluing their property. In the Jim Crow South, officials used property taxes to punish Black homeowners and churches that boycotted white businesses or hosted civil rights meetings.”
After providing further historical context for this issue, the Post article succinctly explained the problem as follows:
The values of black-owned homes tend to grow more slowly than values of white-owned ones. The white people who make up the vast majority of home buyers tend to avoid black neighborhoods, which cuts black sellers off from many potential buyers. That can drive down the sale price of black-owned homes.
Given that difference in price appreciation, if an assessor assumes a black-owned home gains value as quickly as a white-owned home, the assessed value of the black-owned home will quickly outstrip its market value. Every year, the black family pays more in property taxes, even though the sales price of its home is not increasing as quickly. Nearby white families benefit from the opposite trend: Their homes increase in value more rapidly than their assessments, giving them an ever-growing tax break.
As the Pew Institute summarized it, “racially motivated or not, many tax assessors still routinely saddle Black and minority residents with property tax bills that are too high given the value of their homes.” So when people say, but slavery end over 100 years ago or question why some people have not “caught up,” this is another example of why. It’s an example of the institutionalized or systemic discrimination that makes it harder to experience the American Dream, equally.
The first thought that comes to mind is a class action. In a class action, a person or small group of people stand up to be class representatives. They bring a lawsuit on behalf of similarly situated people. Those other people, the class members, do not file lawsuits. If the class representatives’ litigation succeeds, the class members can opt-in or opt-out of the settlement. Opting out preserves the right to sue individually.
Class actions are powerful because they are efficient. They allow a large number of people to resolve a legal complaint through one lawsuit. They can pool their resources that way. If the damages at issue are small, it makes it economically feasible to bring the lawsuit when pooled together. There are many benefits to class actions. There are downsides as well. Sometimes it seems like only the lawyers are the ones making money in class action suits. Lawyers often charge an hourly rate and the cases take many hours to resolve. If the damages at issue on a per-person basis are small, the disparity between the individual class member award and lawyers’ fees is significant. However, this vehicle is sometimes the only way various issues get addressed because there is no other way to pay for the litigation.
A class action to address this issue could be difficult for several reasons. There may be no one national defendant that can be sued. Taxation happens on the local level, meaning local governments. That requires many class actions in many places. Additionally, recovery would be a challenge given the economic realities facing local government. Spit-balling on the fly, maybe the federal government failed in its duties and could be held to account. Other potential legal remedies include injunctive relief or other actions to at least change the practice if not recover damages for those who paid unfair amounts in the past. Additional legal actions could include civil rights litigation on behalf homeowners or by groups. Each would present challenges as recent history has shown us.
Not an Easy Path Forward, But Lawsuits can Bring About Change
As Pew noted:
Chicago offers a glimmer of hope, according to Aneel Chablani of the Chicago Lawyers’ Committee for Civil Rights, which represented three housing organizations in a 2017 lawsuit alleging that Cook County Assessor Joseph Berrios violated state and federal civil rights and housing laws by producing assessments that were unfair to poor and minority homeowners.
In 2019, the plaintiffs agreed to dismiss the lawsuit after Berrios’ successor, Fritz Kaegi, increased transparency and made other changes, including ordering an external audit of his office, pushing for automatic renewals of tax exemptions for older residents, and improving the appeals process. The Cook County Assessor’s Office also has begun using digital images of properties taken through aerial photography.
The case failed on technical legal grounds – standing. Data from the June 2020 study might also help change the outcome in future cases.
Lawsuits like this are not just about damages – economic recovery for the victims. They are also a vehicle for change. They force the government to change it practices, even when the plaintiffs lose.
KBA’s attorneys handle class action lawsuits. We recently resolved one for trailer park owners in our home town concerning water bills. KBA has the privilege of working with some of the best plaintiffs’ firms in the country. We thank our friends for putting this on our radar so we can explore if and how we can help.