What history has to say about the fairness of tax sales

In its recent decision in Pung v. Isabella County, the Supreme Court ruled that when the government sells your home to satisfy a tax debt, just compensation comes from the surplus of a fairly conducted tax sale and not the home’s fair market value.

The Court’s focus on fairness matters especially in Pung because the fairness of the Pungs’ own tax sale is disputed, a concern that was especially evident in the concurrence of Justices Clarence Thomas and Neil Gorsuch.

The Court did not define what a “fairly conducted” process looks like, leaving that question for the lower court to address. The Court did, however, condition its holding on the existence of a properly conducted tax sale, grounding that standard in the country’s history of tax sales.

What has history shown us about properly conducted tax sales? The 19th century has some poignant lessons.

Protecting the integrity of tax sales

Between 1841 and 1844, William Slater failed to pay the property taxes on his 19,944 acres in what is now West Virginia, resulting in an outstanding tax debt of $30.03. In 1845, the County declared the property delinquent and the land was auctioned in a tax sale.

The goal of tax auctions was to collect the back taxes while disturbing as little property as possible. To this end, the sheriff was required to begin by auctioning the smallest amount of land necessary to satisfy the tax debt. If, for example, you owed taxes on a 20,000-acre tract of land, and someone was willing to buy 100 acres for enough money to cover the tax debt, there was no reason to sell the remaining 19,900 acres.

When no one bid on small parcels of Slater’s land, the property was then auctioned in its entirety, resulting in a man named Maxwell purchasing Slater’s land, which was said to be worth around $6,000, for about $30.

It was a steal of a deal for Maxwell, but Slater questioned the fairness of the auction and took the matter to court.

According to Slater, several people at the auction had been willing to pay off his tax debt in exchange for a smaller parcel of his land. But Maxwell spread a rumor, persuading them not to bid.

Under the law, property owners had the opportunity to redeem their land even after the tax sale had ended. It was alleged that Maxwell had walked around the crowd, imploring would-be bidders not to waste their time because he had it on good authority that the property owner intended to use his right to redemption.

No one wanted to tie up their money for a sale that wouldn’t even go through. And the only person who did bid on the property was Maxwell.

In court, Slater argued that the sale was invalid because the price was grossly inadequate, the sheriff sold more land than necessary, and Maxwell had fraudulently suppressed competition at the auction.

Eventually, the case went to the Supreme Court, where the justices rejected Slater’s first two claims, concluding that the low sale price and the sheriff’s decision to auction the entire tract did not, on the facts before it, invalidate the sale. But on Slater’s third claim—that Maxwell had fraudulently suppressed competition at the auction—the Court agreed.

In the majority opinion, Justice Stephen Johnson Field wrote:

It is essential to the validity of tax sales not merely that they should be conducted in conformity with the requirements of the law, but that they should be conducted with entire fairness. Perfect freedom from all influences likely to prevent competition in the sale should in all such cases be strictly exacted.

The owner is seldom present and is generally ignorant of the proceeding until too late to prevent it. The tax usually bears a very slight proportion to the value of the property, and thus a great temptation is presented to parties to exclude competition at the sale.

The Court’s holding shows us that historically, a fair tax sale depended not only on the government’s conduct, but also on the integrity of the auction itself. The principles reflected in Slater were also consistent with a broader understanding of tax-sale law that viewed tax sales as extraordinary exercises of government power requiring equally extraordinary procedural protections.

Extraordinary power requires extraordinary guardrails

Cooley, the renowned 19th-century constitutional scholar and Michigan Supreme Court justice, quite literally wrote the book on tax law. For generations, courts—including the Supreme Court—have relied on his treatise as one of the leading authorities on the history and traditions of American taxation.

Cooley explained that tax sales are unlike ordinary debt collection. Instead of proceeding through the traditional judicial process, they give the government the authority to divest individuals of their property through a statutory process.

Governments unquestionably have the authority to collect taxes. But because tax sales permit the government to exercise one of its most sweeping powers outside ordinary litigation, that authority must be constrained by rigorous procedural safeguards.

Those safeguards were never intended as mere technicalities. Requirements governing notice, assessments, advertising, property descriptions, redemption rights, and the conduct of the sale existed for a reason: to protect property owners from losing their property unnecessarily or unfairly.

As Cooley repeatedly emphasized throughout his treatise, the purpose of tax sales was to collect the taxes owed—not to confiscate valuable property.

More than a century later, those principles remain remarkably relevant. In Pung, when the Supreme Court anchored its just compensation rule in the history of “fairly conducted” tax sales, it pointed back toward the very historical tradition Cooley spent his career documenting. And it is a tradition PLF keeps alive in our fight against home equity theft.

Putting fairness into practice

Ideally, PLF hoped the Court would affirm in Pung that just compensation is measured by the fair market value of the remaining equity in a property above and beyond the tax debt, measured on the date when it was taken. The Court rejected that argument. But in stressing the importance of measuring just compensation by the surplus of a fairly conducted tax sale, the Court’s decision leaves the fairness question very much alive.

While PLF continues litigating home equity theft cases across the country, we are also working to ensure that state tax sale laws incorporate the kinds of procedural protections that courts and scholars have recognized for generations.

Our model legislation seeks to protect the fairness of tax sales by suggesting possible reforms, which include a minimum tax debt threshold before foreclosure, strengthening notice requirements, encouraging genuinely competitive sales by requiring foreclosed properties to be sold by a real estate agent, requiring public auctions of non-residential properties, and using states’ existing abandoned property processes to return surplus equity to homeowners quickly after the tax debt is satisfied.

These proposals are not simply modern policy preferences. They reflect the same principles that animated Slater and Cooley: Governments may collect the taxes they are owed, but they must exercise that authority fairly.

Those reforms are already gaining traction. Last year, Oregon adopted many of the protections reflected in PLF’s model legislation, demonstrating that historical principles of fairness can continue to shape modern tax-sale law.

The fight against home equity theft has always been about protecting property rights by ensuring that governments exercise one of their most extraordinary powers fairly. Pung did not close that conversation. It reaffirmed its importance.