On Monday, the U.S. Supreme Court ruled that a city does not breach constitutional rights by forgiving a part of future property tax obligations for certain taxpayers, but refusing to refund payments collected from other taxpayers in same or similar assessments.
The ruling will directly influence tax policy, local governments and taxpayers. In the instant case before it, a 6-3 Supreme Court majority decided that Indianapolis acted within its rights to distinguish between certain tax payers over a special sewer tax levied in 2004. The high court held that the distinction between citizens, as done by the city authorities was rational and did not affect the Equal Protection Clause.
However, property owners in Indianapolis who complied with city rules and each paid $9, 278 tax upfront to the city authorities were upset that those who chose to pay in monthly installments had their obligations forgiven.
Indianapolis adopted a new public improvements financing system and revised the rules requiring that homeowners pay a flat fee of $2500 to connect to the sewer line. Property owners who had chosen to pay the previous full amount sued the city.
Both the trial court and the Indiana Court of Appeals found that the constitutional right to equal protection of the plaintiffs had been violated. However, the Indiana Supreme Court disagreed and held that the city had acted properly in a bid to reduce continuing administrative costs that were associated with collecting installments over 20 to 30 years.
On Monday, the U.S. Supreme Court upheld the decision and Justice Stephen Breyer wrote that it was rational for a city to try to avoid complex and expensive burdens if it could be done by a simple tax-related distinction.
The U.S. Supreme Court held that fundamental rights did not enter the equation since the basis upon which the city made the distinction between taxpayers did not involve local economic, social or commercial considerations.
