U.S. Supreme Court

City Didn't Violate Equal Protection Clause by Differing Tax Forgiveness, Supreme Court Rules


A tax forgiveness plan that caused some people to pay as much as 30 times more for a sewer hook-up than their neighbors did not amount to a constitutional violation, the U.S. Supreme Court has ruled.

At issue was a 2005 decision by the city of Indianapolis to forgive future payments for those paying a sewer improvement fee on an installment plan. Those who had paid the full $9,278 fee in one lump sum, on the other hand, were refused refunds. In a 6-3 decision (PDF), the U.S. Supreme Court ruled the city had a rational basis for the distinction and found no equal protection violation.

Justice Stephen G. Breyer wrote the majority opinion. The city had forgiven the sewer debt because it was adopting a new payment system that financed sewer projects in part through bonds. “Distinguishing past payments from future obligations is a line well known to the law,” Breyer wrote. “Sometimes such a line takes the form of an amnesty program, involving, say, mortgage payments, taxes or parking tickets.”

Continuing to collect the installment debt that was in some cases as low as $25 a month would be “complex and expensive,” Breyer said. The costs would continue even as the number of debtors dwindled, “thereby continuously increasing the per-debtor cost of collection.” Refunding fees to those who paid in full would add further administrative costs, he said.

“Even if petitioners have found a superior system, the Constitution does not require the city to draw the perfect line nor even to draw a line superior to some other line it might have drawn,” Breyer said. “It requires only that the line actually drawn be a rational line.”

He distinguished a 1989 Supreme Court case, Allegheny Pittsburgh Coal Co. v. Commission of Webster County, in which a tax assessor determined property values based on the last sale. The opinion finding an equal protection violation involved “a clear state law requirement [requiring equal valuation] clearly and dramatically violated,” he said.

Chief Justice John G. Roberts Jr. dissented in an opinion joined by Justices Antonin Scalia and Samuel A. Alito Jr. Roberts. Some homeowners whose fees were forgiven had paid as little as $309, an amount 30 times less than the lump-sum fee, the dissenters said.

“Our precedents do not ask for much from government in this area—only ‘rough equality in tax treatment,’ ” Roberts wrote. “It is and should be; we give great leeway to taxing authorities in this area, for good and sufficient reasons. But every generation or so a case comes along when this court needs to say enough is enough, if the equal protection clause is to retain any force in this context. Allegheny Pittsburgh was such a case; so is this one.”

The case is Armour v. City of Indianapolis.

Prior coverage:

ABAJournal.com: “Supreme Court to Decide Tax Fairness Case Involving Sewer Fee Forgiveness”

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