Can The Government “Keep The Change”? Tax Foreclosure Likely Taking Where It Keeps the Profits

by: Joseph Grather
27 Apr 2023

The Supreme Court heard arguments yesterday in Tyler v. Hennepin County. Full analysis of the arguments can be found on SCOTUSBLOG.

It doesn’t appear that the Justices were persuaded by the government’s position that it was entitled to keep the $25,000 in excess funds received after selling Ms. Tyler’s house for payment of back taxes.  Tyler owed $15,000 in back taxes.  Hennepin County took title to Ms Tyler’s property by foreclosing on its tax lien, then sold the property for $40,000.  The tax lien was satisfied by payment of $15,000, but Hennepin County kept the $25,000!

And, the Supreme Court of the United States of America has to decide whether that’s fair ?!? Really?

The best example apparently came from the Justice Kagan who asked whether the same result would occur where there was a $5,000 tax debt and a $5,000,000 (five million) dollar house.  The government attorney responded, “yes.”  The Chief Justice then wondered aloud, “what’s the point of the takings clause?”

Another question comes to my mind, and that’s whether the $40,000 represented just compensation itself.  If the government simply sold to the lowest bidder at an auction, how again is that constitutional?

The case hasn’t been decided yet, but I would hope that the writing is on the wall.