The power of taxation is one of the essential attributes of sovereignty, and is inherent in and necessary to the existence of every government. In republics it is vested in the legislature, and in the absence of any constitutional restrictions, may be exercised by them, both as to objects and modes, to any ex

tent which they may deem proper. Knowlton v. Supervisors of Rock County, 9 Wis. 378, 387 (1859).

If the power of taxation is within the plenary power of state legislatures, what are the limitations on this power and why have such limitations been included in state constitutions?

Robert F. Williams, "The Tax Injunction Act and Judicial Restraint: Property Tax Litigation in Federal Courts"

Rutgers Law Journal 12 (Summer 1981): 653. 1981 Rutgers Law Journal. Reprinted by permission.

I. Introduction

Problems in real property taxation have attracted increasing national attention in recent years.' Inequality in the assessment, or valuation, of real estate for the purpose of imposing ad valorem taxes has caused the most difficulty. The taxing unit must officially assign a value to a piece of property before it applies its tax rate to calculate the taxpayer's

bill. Assigning value is a difficult and complex matter. It calls for a "value judgment" that is discretionary, subjective and of low visibility.

Inevitably, some taxpayers will disagree with such governmental decisions affecting their pocketbooks. Almost all real estate is assessed for tax purposes below its market value (fractional or differential assessment), so the taxpayer rarely argues the property was assessed at more than its true value. Rather, the dispute arises when a taxpayer believes his property is assessed at a higher percentage of

1See generally, G. Benson, S. Benson, H. McClelland & P. Thompson, The American Property Tax: Its History, Administration and Economic Impact (1965); A. Lynn, The Property Tax and Its Administration (1969); Farr, The Property Tax As an Instrument for Economic and Social Change, 9 Urb. Law. 447 (1977); Hammond, Real Property Tax Assessment: A Look At Its Administration, Practice and Procedures, 38 Alb. L. Rev. 498 (1974); Note, Inequality in Property Tax Assessments: New Cures for an Old Ill, 75 Harv. L. Rev. 1374 (1962) [hereinafter cited as Note, Inequality]; Note, Tax Assessment of Real Property: A Proposal for Legislative Reform, 68 Yale L.J. 335 (1958); Note, The Road to Uniformity in Real Estate Taxation: Valuation and Appeal, 124 U. Pa. L. Rev. 1418 (1976) [hereinafter cited as Note, Uniformity].

its value (assessment to market value ratio) than are other properties in the taxing unit. When everyone is receiving the "break" of underassessment, however, it can be very difficult for people to detect inequality by comparing their tax assessments with others.R The practice of fractional assessment continues for a number of intentional and unintentional reasons.7

A disturbing and persistent inequity arises when properties in certain neighborhoods are assessed at a higher percentage of their value than those in other neighborhoods within the taxing unit. The assessment-to-market-value ratio of properties in one neighborhood can be higher than in others and, therefore, upon application of a uniform tax rate these taxpayers pay a disproportionate share of the tax burden. They have a higher effective tax rate. Numerous convincing studies have documented this form of discriminatory taxation in declining, low

Hellerstein, Judicial Review of Property Tax Assessments, 14 Tax. L. Rev. 327, 340 (1959); Note, Uniformity, supra note 1, at 1426-28. For a discussion of Florida's recent legislative developments in this area, see Pajcic, Weber & Francis, Truth or Consequences: Florida Opts for Truth in Millage in Response to the Proposition 13 Syndrome, 8 Fla. St. U. L. Rev. 593 (1980).

Inequalities in tax burden occur because no local government assesses all property at the same fraction of full market value. Of uncertain origin, the practice of differential assessment may be explained by several factors. Local governments never have had enough assessors or an information system capable of keeping assessments current with changing market values. Properties are usually valued or revalued when buildings are constructed or substantially altered; newly constructed or rehabilitated properties tend to be assessed at higher percentages of market value than are older, unaltered properties. Properties are frequently revalued when they are bought and sold, while properties which do not turn over are revalued only at long intervals. Properties in stable or declining neighborhoods are also likely to have higher assessment to market value ratios (assessment/market ratios) than properties located in more attractive neighborhoods where market values are stable or rising.

Farr, supra note 1, at 452. See also K. Case, Property Taxation: The Need for Reform 17-32 (1978); H. Aaron, Who Pays the Property Tax? 59-64 (1975). Over-assessment of low-income neighborhoods is not, however, universal. See D. Paul, supra note 5, at 130.

In Gibraltar Corrugated Paper Co. v. North Bergen Twp., 20 N.J. 213, 219, 119 A.2d 135, 137 (1955), the New Jersey Supreme Court said with respect to the unequal assessment problem: "The failure to reach a uniform state of equality at true value is probably due to the frailties of human nature." Justice Brennan responded in his concurring opinion: "Whether the failure to make assessments at true value is 'due to the frailties of human nature' or other reasons, the day has certainly arrived when officials at all levels of the administrative process are utterly without a defense to continue the practice." Id. at 223, 119 A.2d at 140.

income neighborhoods often inhabited by minorities.9

Lacking the power and cohesion to obtain equitable treatment through concerted political action, taxpayers in such areas could be expected to turn to the courts for remedies.

Federal courts and federal law do not provide the types of remedies one might expect. The limited role of federal law, usually a dominant force in "discrimination" cases, is attributable to two factors. First, substantive federal law provides scant relief. There is virtually no federal statutory protection and the United States Supreme Court's interpretation of the Equal Protection Clause in cases concerning unequal property tax assessment has been very restricted. States may separate real estate into classifications, such as commercial, industrial, single-family residential and multi-family residential, and apply different rates of taxation or levels of assessment to them.12 Even within a single classification, unequal assessments13 do not violate the Equal Protection Clause unless intent or systematic discrimination is shown.14

For a complete treatment of the causes and effects of this type of discrimination, including case studies, see Baar, Property Tax Assessment Discrimination Against Low-Income Neighborhoods, 13 Urb. Law. 333 (1981). See also D. Paul, supra note 5, at 32-35.

Evidence also indicates a generally higher assessment level for commercial and industrial property, when compared to residential property. Id. at 25 passim. But see Hearings Before the Subcomm. on Intergovernmental Relations of the Senate Comm. on Government Operations on the Impact and Administration of the Property Tax, 92d Cong., 2d Sess. 57-60 (1972) [hereinafter cited as Hearings]; Pomp, What is Happening to the Property Tax? Proceedings of the Seventy-Second Annual Conference, National Tax Assoc. 10 (1970), reprinted in 10 Assessors J. 107 (1980) (movement toward greater burden on residential property).

12Nashville, C. & St. L. Ry. v. Browning, 310 U.S. 362, 368 (1940): "That the states may classify property for taxation; may set up different modes of assessment, valuation and collection; may tax some kinds of property at higher rates than others...these are among the commonplaces of taxation and of constitutional law." See also Allied Stores of Ohio, Inc. v. Bowers, 358 U.S. 522, 526, (1959) ("that clause imposes no iron rule of equality, prohibiting the flexibility and variety that are appropriate to reasonable schemes of state taxation."); Note, supra note 6, at 1421.

13 Unequal assessments within a single classification result from properties being assessed at different percentages of their values.

14Clement, Discrimination in Real Property Tax Assessment: A Litigation Strategy for Pennsylvania, 36 U. Pitt. L. Rev. 285, 314 (1974); Note, Inequality, supra note 1, at 1375-76; Note, Uniformity, supra note 1, at 1420 n.25.

In Lehnhausen v. Lake Shore Auto Parts Co., 410 U.S. 356 (1973), the Court stated that “[w]here taxation is concerned and no specific federal right, apart from equal protection, is imperiled, the states have large leeway in making classifications and drawing lines which in their judgment produce reasonable systems of taxation.” Id. at 359.

Cases alleging discrimination on the basis of race, however, are among those most likely to prevail under this equal protection analysis. 15

The limited federal substantive law . . . compelled taxpayers to seek relief from unequal assessment under state law, particularly state constitutional and statutory requirements for "uniform," "full value" or "equal" assessment.24 Despite major advances, recourse to these state guarantees has not been fully effective, particularly as to discriminatory assessment of low-income, minority neighborhoods.25

15 Berry, A Federal Forum for Broad Constitutional Deprivation by Property Tax Assessment, 65 Cal. L. Rev. 828, 829 n.2 (1977); Clement, supra note 14, at 314.

24The Supreme Court, in Nashville, C. & St. L. Ry. v. Browning, 310 U.S. 362 (1940) specifically declined to read the Equal Protection Clause as equivalent to state constitutional uniformity provisions:

This Court has previously had occasion to advert to the narrow and sometimes cramping provision of these state uniformity clauses, and has left no doubt that their inflexible restrictions upon the taxing powers of the state were not to be insinuated into that meritorious conception of equality which alone the Equal Protection Clause was designed to assure.

Id. at 368.

Regarding the "narrow and sometimes cramping" effects of state uniformity in taxation provisions, see Myers, Open Space Taxation and State Constitutions, 33 Vand. L. Rev. 837 (1980).

25 See Berry, supra note 15, at 829.

Bettigole v.

Assessors of Springfield

343 Mass. 223, 178 N.E.2d 10 (1961)
CUTTER, Justice.

These two bills in equity present questions about the validity of the proposed 1961 assessment of property taxes in Springfield. They have been argued together.

The Bettigole case is brought by individual, fiduciary, and corporate owners of multi-family dwellings, commercial real estate, and other property in Springfield which it is alleged "will be in 1961 and subsequent years... deliberately . . . over-valued and over-assessed both in relation to other classes of taxable real estate for which assessed valuations have been established at lower percentages of fair cash value and in relation to the general average or ratio of valuations to fair cash value of taxable real estate in" Springfield. It is alleged that (the board) has for many years established assessed valuations for different

classes of real estate in the city at widely differing percentages of the full fair cash value of such real estate and plans to do so for 1961. The bill seeks a declaration as to the "lawfulness under the Constitution and laws of [t]he Commonwealth of the policy and practice" just described, and also injunctive relief (a) against continuance of this assessment practice by the assessors, and (b) against action to send out bills for, and to collect, the taxes so assessed. The Attorney General has been notified of the proceeding and afforded an opportunity to be heard.

By August 1, 1961, the board "had determined the sound value [a term used by the board as equivalent to fair cash value] of each parcel of taxable real estate in the [c]ity as of January 1, 1961, and the fair cash value of the personal property owned by each [taxable] person." The board had also classified all parcels of real estate into six categories, ... and a majority had voted on September 8 and 15, 1961, "to establish... [1961] assessed valuations of all taxable property in the [c]ity by applying the following...percentages to the sound value determined by the... [board] for the following classes of property," respectively, viz., (1) single family residences-50%; (2) two family residences-60%; (3) three family residences-65%; (4) four or more family residences-70%; (5) property of public utilities and commercial and industrial properties-85%; (6) farms, vacant land, and other real estate-70%. Personal property subject to local taxation was to be assessed at 85% of the fair cash value thereof previously determined by the board.

"The [b]oard determined assessed valuations for 1960 in substantially the same manner as it intends to use in 1961 and 1962” and the board's "practice of applying varying percentages of sound or fair cash value of different classes of property in arriving at assessed valuations was deliberate and intentional." A table (Annex A), made a part of each statement of agreed facts... shows, for example, that the fair cash (sound) value of 22,005 parcels of single family residence property was $266,285,568 (col. 3), but that these parcels were assessed at an aggregate of $133,142,792 (col. 5) for only 50% (col. 4) of their fair cash (sound) value. The table indicates that, if all taxable property in the city had been assessed at 100% of fair cash value, these 22,005 parcels would have been subjected to aggregate taxes of $11,223,937 (col. 7) at a tax rate of $42.15 per $1,000 of valuation, whereas they were in fact taxed only $8,601,024 (col. 6) under a tax rate of $64.60. The table also shows that 2,521 parcels of public utility, commercial and industrial properties, assessed at 85% of fair cash value (col. 4), were in fact taxed $9,602,217 (col. 6), whereas, if all taxable property in the city had been assessed at 100% of fair cash value, the aggregate tax on these

The plaintiffs are owners of properties within the classes of four and more family residences, commercial and industrial properties, and farms, vacant land and other real estate, listed in detail in annexes to the bills. Because "they own such property... [each of the plaintiffs will] pay substantially more in taxes for 1961 if the [board's assessing] practice described... [earlier in this opinion] is followed than if the assessed valuations of all taxable property in Springfield were the fair cash value of such property."

The plaintiffs "insist that, in accordance with the [C]onstitution and laws of the Commonwealth, the assessed valuations of all taxable property in . . Springfield should be the fair cash value of such property." A majority of the board insists "upon following. ..[the above described] practice... and have refused to establish assessed valuations . . . at the fair cash value of... property."

1. These cases continue property tax controversies which have existed in Springfield in recent years.. .. The bills present for consideration, upon very complete, precise statements of agreed facts, the question whether the whole 1961 property tax assessment scheme violates the Constitution of the Commonwealth (Part II, c. 1, Sec. 1, art. 4) which empowers the General Court "to impose and levy proportional and reasonable assessments, rates, and taxes, upon all the

inhabitants of, and persons resident, and estates lying, within the said commonwealth. . . ." (emphasis supplied). See also art. 10 of the Declaration of Rights, which reads, “Each individual... has a right to be protected... in the enjoyment of his life, liberty and property, according to standing laws. He is obliged, consequently, to contribute his share to the expense of this protection...." (emphasis supplied). It is well settled that the words "his share" in art. 10 of the Declaration of Rights "forbid the imposition upon one taxpayer of a burden relatively greater or relatively less than that imposed upon other taxpayers." See Opinion of the Justices, 332 Mass. 769, 777, 126 N.E.2d 795, 800. Similarly, “the expression 'proportional and reasonable' [in Part II, c. 1, Sec. 1, art. 4] forbids the imposition of taxes upon one class of persons or property at a different rate from that which is applied to other classes." See Opinion of the Justices, 341 Mass. 738, 167 N.E.2d 745, 752. This interpretation of these constitutional provisions has been unvarying "from the early days of the Commonwealth to the present time." See Opinion of the Justices, 332 Mass. 769, 778-779, 126 N.E.2d 795, where the earlier decisions are collected; Carr v. Assessors of Springfield, 339 Mass. 89, 91-93, 157 N.E.2d 880; Stone v. Springfield. 341 Mass. 246, 248, 168 N.E.2d 76, 78 (where it was said, "An intentionally made, widely disproportionate assessment would constitute a gross violation of 'a fundamental constitutional limitation upon the power... to impose property taxes' ")....

In Cheshire v. County Commrs. of Berkshire, 118 Mass. 386, 389, this court said that the constitutional provision for "proportional and reasonable" taxes "forbids their imposition upon one class of persons or property at a different rate from that which is applied to other classes, whether that discrimination is effected directly in the assessment or indirectly through arbitrary and unequal methods of valuation." The court there recognized that "[p]ractically it is impossible to secure exact equality or proportion in the imposition of taxes" but it pointed out that the statutory "aim [should] be towards that result, by approximation at least." The statements of agreed facts negate any suggestion of "equality or proportion" in the 1961 Springfield assessments, for it is established that disproportion, rising to a maximum of the difference between 50% and 85% of fair cash value, "was deliberate and intentional" and that personal property and one class of real estate was thus to be assessed 170% (85/50) of the level of assessment of another class of real estate. This is not even equality by "approximation," which, at the least, requires attempted equality of assessment in absolute good faith and to the best of the abilities of the public officers charged with making valuations.

Discussion Notes

1. The Bettigole case is discussed in Note, “Inequality in Property Tax Assessments: New Cures for an Old Ill," Harvard Law Review 75 (May 1962): 1374.

2. For a case reaching a different result, see City of Sacramento v. Hickman, 428 P.2d 593 (Cal. 1967).

3. For an economic analysis of litigation seeking uniform assessment, see Robert P. Inman and Daniel L. Rubinfeld, "The Judicial Pursuit of Local Fiscal Equity," Harvard Law Review 92 (June 1979): 1662.

4. Sioux City Bridge v. Dakota County, 260 U.S. 441, 446 (1923):

The dilemma presented by a case where
one or a few of a class of taxpayers are as-
sessed at 100 percent of the value of their
property in accord with a constitutional or
statutory requirement, and the rest of the
class are intentionally assessed at a much
lower percentage in violation of the law,
has been often dealt with by courts and
there has been a conflict of view as to what
should be done. There is no doubt, how-
ever, of the view taken of such cases by the
federal courts in the enforcement of the
uniformity clauses of state statutes and
constitutions and of the equal protection
clause of the Fourteenth Amend-

ment. The exact question was considered at length by the Circuit Court of Appeals of the Sixth Circuit in the case of Taylor v. Louisville & Nashville R.R. Co., 88 Fed. 350, 364, 365, and the language of that court was approved and incorporated in the decision of this Court in Greene v. Louisville & Interurban R.R. Co., 244 U.S. 499, 516, 517, 518. The conclusion in these and other federal authorities is that such a result as that reached by the Supreme Court of Nebraska is to deny the injured taxpayer any remedy at all because it is utterly impossible for him by any judicial proceeding to secure an increase in the assessment of the great mass of under-assessed property in the taxing district. This Court holds that the right of the taxpayer whose property alone is taxed at 100 percent of its true value is to have his assessment reduced to the percentage of that value at which others are taxed even though this is a departure from the requirement of statute. The conclusion is based on the principle that where it is impossible to secure both the standard of the true value, and the uniformity and equality required by law, the latter requirement is to be preferred as the just and ultimate purpose of the law.

Gottlieb v. City of Milwaukee 33 Wis.2d 408, 147 N.W.2d 633 (1967)

The Urban Redevelopment Law was enacted initially by ch. 333 of the Laws of Wisconsin of 1943. Although it has been modified to some degree, in substance the law authorizes local governing bodies of Wisconsin cities to enter into contracts with persons who have formed what is referred to as a redevelopment corporation. These contracts require the erection of buildings or improvements according to an approved plan in an area of the city found to be substandard or insanitary in exchange for the privilege of partial tax freeze.

Sec. 66.409 provides that the local governing body may by ordinance exempt real property held by a redevelopment corporation for a maximum exemp

tion period of not more than thirty years from that portion of every local tax that is in excess of the "maximum local tax." The "maximum local tax" is defined in Sec. 66.405(3) (j) and (m) as the tax that would have been payable if computed on the last assessed valuation of the parcel of real estate prior to the transfer of the property to the redevelopment corporation.

The plaintiffs herein allege that the law violates the rule of uniformity laid down by Art. VIII, Sec. 1, of the Wisconsin constitution in that it requires the assessor to ignore for the period of the "freeze" the value of the particular improvements which in other locations or under other ownership would be assessable and taxable and the consequence of this is to cause the effective rates on taxable real estate to be unequal.

HEFFERNAN, Justice.