The Search for Tax Justice is a Tax Notes State series examining the inequities inherent in state and federal taxes.
In this inaugural installment, Andrew Kahrl, professor of history and African American studies at the University of Virginia, explores the history of discriminatory tax practices against Black property owners.
Copyright 2021 Andrew Kahrl.
All rights reserved.
Oliver Wendell Holmes once called taxes “what we pay for civilized society.” Historically, African Americans have been forced to pay a disproportionate share of that cost — no more so than when it comes to property taxes. Almost from the moment that Black people began acquiring property following emancipation, they became subject to discriminatory practices that forced them to pay higher effective tax rates than white people while receiving much less in return. The cumulative effects have been devastating — and mostly gone unrecognized.
Throughout the Jim Crow era (ca. 1890-1965), white tax assessors in the South routinely overassessed Black-owned property relative to white-owned property. In 1916 the average assessment on white-owned farmland in Virginia, for example, was 33.1 percent of market value; for black-owned land, it was 45.3 percent of market value. In towns and cities, white-owned lots were assessed on average at 52.9 percent of market value and Black-owned lots at 58.7 percent. In Brunswick County, Virginia, in 1923, Black-owned land was assessed on average at $17.40 an acre; white-owned land in that county, in contrast, was assessed an average of $15.47 an acre. Black homeowners in southern cities frequently charged that city assessors deliberately overvalued their properties. Discriminatory assessment practices were not limited to real property. Black people’s personal property also tended to be assessed higher, in addition to being more likely to be subject to taxation in the first place.
At the same time, white segregationist governments denied African Americans access to the public services and resources their tax payments supported. White people often justified this — incredibly — on the false notion that Black people paid little in taxes and should therefore be content with whatever crumbs dropped from (white) taxpayers’ plates. Racist depictions of white people as “taxpayers” and black people as “tax moochers” played an instrumental role in the making of Jim Crow and remains a staple of antitax politics among the political right in America today. Indeed, the racist fiction that Black people don’t pay much in taxes has served not only to justify austerity measures that disproportionately hurt Black communities, but also to rationalize the use of regressive forms of taxation or engage in discriminatory practices against Black taxpayers.
Discriminatory assessments against Black property owners did more than drain Black communities of resources. It also made African Americans more vulnerable to property loss via tax delinquency. As they did with assessments, white local officials abused tax laws to force African American owners of valuable property into delinquency, whereupon they took their land and homes and left Black families with nothing. In 1940, NAACP special counsel and future Supreme Court Justice Thurgood Marshall observed that, in the South, tax sales functioned to “depriv[e] Negroes of their property through subterfuge.” Marshall noted instances of local tax officials deliberately neglecting to mail tax bills to some landowners or not recording their tax payments. Once the taxes were past due, Marshall noted, “the property [was] quietly sold at a tax sale without notice to the owners. The Negroes [were] not notified until after the statutory period of redemption has passed. They [were] then forced to leave the property.” This form of racist plunder, Marshall lamented, was “almost completely within the letter of the law.”
Started during Jim Crow, both racially discriminatory overassessments and tax foreclosures continue to this day. Recent studies1 have found that properties in Black urban neighborhoods continue to be overassessed relative to those in white neighborhoods. And while few local officials today are as brazen as those under Jim Crow, ample evidence suggests that local governments continue to pursue tax foreclosures and conduct tax sales in a discriminatory manner. The fiscal crises facing local governments in recent years has further incentivized them to engage in discriminatory and predatory tax practices that disproportionately affect Black homeowners and small businesses.
It is impossible to fully account for the financial losses that Black America has suffered resulting from discriminatory overassessments and predatory tax foreclosures, but evidence suggests that the costs were — and remain — considerable. By increasing the cost of homeownership, higher-than-average property assessments depressed home values and limited property appreciation. Coupled with racist practices by banks and the real estate industry that segregated housing markets and denied home financing to Black borrowers, higher-than-average property taxes in Black neighborhoods meant that, even when Black people could buy a home, it would cost more and be worth less. Since homeownership remains one of the main sources of wealth for average Americans, this goes far in explaining why the wealth gap stands as the starkest measure of racial inequality, with white Americans possessing eleven times the wealth of Black Americans.
Along with limiting Black Americans’ wealth-building capacity, considerable evidence abounds that property tax laws and practices resulted in the mass dispossession of Black property and, with it, Black wealth. Areas of the South that were once home to large numbers of Black landowners, such as the South Carolina and Georgia Sea Islands,2 are today home to million-dollar mansions, PGA golf courses, exclusive resorts, and gated communities. Tax sales played a key role in that transformation, and its inequitable outcomes. Beginning in the 1960s and continuing to this day, land speculators and developers ruthlessly exploited local tax delinquency laws to seize valuable properties from “land rich but cash poor” Black families living in places like Hilton Head Island for pennies on the dollar. Indeed, the wealth these areas generate today has not merely failed to trickle down to the region’s impoverished Black population; it came directly at their expense and through the plunder of Black assets.
How did property taxes become so vulnerable to discriminatory abuse, and what can be done about it? I argue that the problem stems, in large measure, from the local nature of the tax itself, and the legal protections afforded to its administrators. Throughout the 20th century and still today, property assessments and tax sales remain a local practice uniquely protected from federal scrutiny or interference. Beginning with the 1937 Tax Injunction Act, Congress placed explicit constraints on taxpayers’ right to contest local assessment practices in federal court, provided local assessors with added protection against the threat of federal lawsuits, and effectively excluded victims of property tax discrimination from the protections of the 14th Amendment. Whereas Congress and the federal judiciary took concrete steps to restrict local governments’ ability to discriminate regarding voting rights, public schools, and housing during the civil rights era, they left control over local taxation firmly in the hands of local officials. This allowed local tax assessors to enjoy a unique — one might say, unparalleled — degree of autonomy and immunity from federal oversight and accountability. Instead, local assessors are accountable to local voters and local interests, who invariably seek favorable treatment rather than equitable taxation for all. Indeed, assessors’ offices are notoriously prone to corruption and favoritism, often to the advantage of large businesses and middle-income white homeowners and to the disadvantage of racial and ethnic minority-owned businesses and minority homeowners.
Even if a property owner receives an unfair assessment, they can appeal it, right? Yes, but they first must know that they have been unfairly assessed, which the assessment process itself serves to disguise. Some states require property to be assessed at full value; other states simply mandate that assessors apply the same fraction to all properties. Others mandate different fractions for different types of property. All these different fractional percentages serve, in practice, to confuse taxpayers and make it difficult for them to know whether they are being taxed fairly. Even if taxpayers believe they have been unfairly assessed, the appeals process is so difficult and time-consuming that it is often only used by owners of high-value properties, which tend to be underassessed to begin with. As a result, the appeals process, designed to correct inaccuracies and ensure against disparities, in practice makes these problems worse.3
Along with increasing the potential for unaccountable abuse, the local nature of the property tax encourages local governments to adopt exclusionary zoning ordinances and other measures designed to increase property values (and with it, tax revenues) and drive out lower-income residents. Because nearly 50 percent of total funding for public schools in America comes from local property taxes, this means that schools in districts with high property values tend to enjoy robust school funding, while schools in poorer districts suffer from lack of funds. And because property values remain so closely tied to race, this funding model further encourages white parents to seek out white neighborhoods and predominantly white school districts for their children, regardless of their personal values or beliefs.
The local property tax stands at the heart of a vicious cycle that perpetuates racial inequities in housing markets and schools. To break that cycle and begin to undo the damage, we must begin by simultaneously removing many of the discretionary powers local governments enjoy over tax assessment and collection and making local governments less reliant on local property taxes for revenue. This must come through massive increases in federal and state funding for public schools and municipalities. As long as cities and counties have the power and motivation to underassess and overassess properties to appease some constituents and achieve real estate market objectives, they will do so, and Black property owners and Black communities will continue to suffer.
1 Carlos Avenancio-Leon and Troup Howard, “The Assessment Gap: Racial Inequalities in Property Taxation,” SSRN (Oct. 5, 2019).