We are too familiar with government-imposed taxes on income, property and consumption. But there is a sleazier class of economic attack favored by some in government; eminent domain seizures and civil forfeiture. These seizures are narrowly focused on assets of an individual and conducted without the owner’s assent. In some cases, the purported justification is to support a “public use,” such as seizure of land needed to complete the route of a highway. In these seizures, the owner is supposed to be paid a fair market price for the asset. In other cases, the seizure of a person’s assets such as bank accounts or real estate is done in hopes of criminal conviction.
New London, Connecticut used eminent domain to seize Suzette Kelo’s house and land for use in redevelopment. New London intended the seizure to help increase real estate tax revenues, create new jobs and replace lower middle-income residents with a wealthier population. For $1 per year, New London gave the redeveloper a 91-acre tract that included Kelo’s property, but he was unable to secure financing for the project and it was abandoned. Pfizer’s employees had been the targeted new residents for the project, but Pfizer consolidated its operations in a nearby city, moving 1,000 jobs from New London. The tract was later used as a dump for debris from 2011’s Hurricane Irene.
Suzette Kelo fought the seizure of her land beginning in 2002 in the Supreme Court of Connecticut and then in the US Supreme Court where the decision was 5-4 in favor of New London. The majority opinion held that the general benefits a community enjoys from economic growth qualify private redevelopment plans as a permissible “public use” under the Takings Clause of the Fifth Amendment. This decision was met with widespread disgust outside the court.
The Supreme Court’s majority was overly deferential to any government claiming “public use.” Specifically, the majority required no persuasive evidence that the public use plan was worthy of the injury it would inflict on the victims of eminent domain. New London had plenty of small landowners to victimize, but it had neither a viable redevelopment plan nor a viable redeveloper. New London also made no credible effort to return the property to owners when its own plans fell apart.
In 2013, the Norfolk Redevelopment and Housing Authority (NRHA) lost an eminent domain case. Old Dominion University had expansion ambitions that called for more land in Norfolk, so the Norfolk City Council asked NRHA to use eminent domain to seize the specific lots it wanted. PKO Ventures, Central Radio, and Norva Plastics appealed NRHA’s eminent domain seizure of their buildings and land. The Virginia Supreme Court ruled against NRHA, because in 2007, the Virginia General Assembly had banned use of eminent domain for most instances of economic development. Earlier, eminent domain could be used to seize land if the majority of plots were deemed “blighted,” but after the reviled landmark Kelo case at the Supreme Court, many state legislatures reined in the scope of what constitutes permissible “public use.”
Government’s kleptocratic tendencies continue. The IRS seized the bank accounts of a legitimate retail store that sold guns and ammunition. This government theft, also called “civil forfeiture,” was imposed on an individual who was not charged with a criminal act, but who was deemed suspicious. The behavior that led to the seizure was his practice of making bank deposits of cash in amounts less than $10,000. Evidently, the government still uses the dumb assumption that anyone walking into a bank with $10,000 must be a criminal. To avoid being harassed and victimized by the dumb $10,000 rule, many non-criminals avoid making deposits of $10,000 or more. The sporting goods retailer clearly faced jeopardy no matter how he did his banking.
The US Department of Justice promised better behavior in the “Equitable Sharing Program,” where the feds are allowed to skim a 20% share of state and local police asset seizures. Going forward, Fed participation will require direct involvement and review by federal authorities before a seizure can be processed under federal law. We note they are not refusing the skim, they are just being more involved than before. Some in Congress are drafting legislation that corrects the loopholes that the Department of Justice left for ongoing revenues.
In the period 2001 through 2014, $2.5 billion was seized from 62,000 people under “Equitable Sharing,” without warrants or indictments. Although they were still innocent, they had to fight in court for a chance to recover their assets and court costs. The Department of Justices’ vow of better behavior would not reform the injustice of seizing assets without warrant or conviction.
In a small number of instances, the public needs a specific asset for a compelling public use (such as footings for a river bridge, but not for a sports-arena parking lot expansion). For those cases, competent plans should be required, full market value should be paid, and a way to unwind a failed project should be required. If law enforcement cannot collect enough evidence to obtain a warrant or indictment, they should have no right to seize property of a “suspect.” The next time Federal tax laws are being reformed, fair restraints on use of eminent domain and civil forfeiture should be included.
Alan Daley is a retired businessman who writes for The American Consumer Institute Center for Citizen Research