Constitutional Implications of Acquisition- Value Real Property Taxation: The Elusive Rational Basis

Acquisition-value real property taxation systems represent adeparture from the traditional practice of taxing real property on its current fair market value. In- contrast to traditional systems, which are still employed by the vast majority of states, under acquisitionvalue taxation a real estate owner's property tax liability is determined by the value of the property when the taxpayer acquired it. In periods of rising real estate prices, such a scheme compels later buyers to shoulder a higher annual tax liability than previous buyers. As a result, there can be great disparities in the tax liabilities of taxpayers owning identical property.

These disparities have given rise to a variety of legal challenges. One such challenge asserts that acquisition-value taxation violates the Equal Protection Clause by giving, without sufficient rational basis, preferential treatment to certain taxpayers.