Michigan Property Tax Law

Michigan property tax law limits increases until a sale occurs

By JOE GRIMM
Detroit Free Press recruiting and development editor

Property taxes got you boggled? Bad enough if you have to pay them. It's worse if you're supposed to be reporting on them or editing stories about them. Mark Hilpert and Roland Anderson of the Michigan Department of Treasury came in to explain them for us at a February Nooner. Here's the skinny:

In Michigan, taxes are determined by multiplying value times rate.

TAXABLE VALUE

Until 1994, property was valued, for tax purposes, at half its market value. This was called its State Equalized Value, or SEV. (No more abbreviations. We promise.)

In 1994, Michigan voters passed Proposal A. That shifted some of the tax burden off property and onto the sales tax, which rose from four cents on the dollar to six.

Proposal A also limited the growth of property tax assessments. Now, we don't use SEV. We use ``taxable value.''

The taxable value will be the lowest number out of these four:

This year's SEV
Last year's taxable value plus 5 percent
Last year's taxable value plus inflation
Last year's taxable value times this year's SEV divided by last year's. (Whew! That got a little confusing, didn't it?)

What you really need to know is that this formula can keep taxable value from growing as fast as property value. It limits the growth in taxable value to 5 percent a year or less.

Today, just two years after Proposal A, a property's taxable value is only a few percentage points lower than its SEV. That gap will continue to spread, as long as inflation drives up property values.

This limit on taxable value assumes no significant change to the property: no new family room, no major fire.

The lid comes off when a parcel is sold. In the year after the sale, taxable value kicks up to the SEV, but just for that year. Then the limit applies to future increases, until there is another sale. A parcel's taxable value is printed on the annual tax bill.

TAX RATES

Property owners can calculate their tax bill by multiplying that taxable value by the tax rate. In Michigan, the property tax rate is called a millage, and it is figured in mills. A mill equals $1 in taxation for every $1,000 in taxable value.

A parcel may have several millages in its tax rate. There is likely to be a millage to operate local government, and another for the county. Part of the millage rate may include mills for libraries, police and fire or schools.

Millage rates are not shown on assessment notices. Property owners can find out their millage rates by looking at their tax bills, or calling their local assessor, or their mortgage company. With the taxable value alone, a property owner can tell how much a tax proposal will cost, just by multiplying the millage rate of the proposal by taxable value. The owner of a parcel with a taxable value of $50,000 who votes on a 2-mill issue would be voting on an additional $100 a year in taxes.

For more help, call Mark Hilpert, chairman of the state tax commission, at 1-517-373-3305, or Roland Anderson, administrator of the property tax division, at 1-517-373-0501.