Proposal A
The property tax reforms instituted under "Proposal A" required a
"cap" or limitation on the annual increase in a property's taxable
value while it is owned by the same person. An excerpt from the
Michigan 1963 Constitution, Section 3, states: "For taxes levied in
1995 and each year thereafter, the legislature shall provide that
the taxable value of each parcel of property adjusted for additions
and losses, shall not increase each year by more than the increase
in the immediately preceding year in the general price level, as
defined in section 33 of this article, or 5 percent, whichever is
less until ownership of the parcel of property is transferred."
Therefore, in the tax year following the transfer of the property,
the taxable value will "uncap" and become equal to the "assessed
value". The year following the uncapping, the limitation will begin
anew until such time the property transfers again.
The assessed value is one-half of the assessor’s estimate of
market value of your property. The capped value is calculated
annually using the following formula: (Prior Year Taxable
Value - LOSSES) x (lesser of the consumer's price index or 1.05) +
ADDITIONS = CAPPED VALUE.
Taxable value is equal to the lesser of Assessed Value or Capped
Value. The taxable value, the number upon which the property taxes
are levied, is determined each year by comparing the assessed and
capped values and choosing the lower of the two.
On March 15, 1994 the voters of the State of Michigan approved
Proposal A which made significant changes to the State Constitution.
Most notably, for Boards of Review, Proposal A implemented a cap on
the growth in Taxable Value. Taxable Value was a new term. Starting
in 1995, property taxes have been calculated using Taxable Value
rather than State Equalized Value which was used prior to 1995.
On December 29, 1994 the Governor signed into law Public Act (PA)
No. 415 of 1994. PA 415 of 1994 contains many changes to the General
Property Tax Act regarding the implementation of Proposal A.
Significant additional changes were implemented by PA 476 of 1996.
What has not changed is the method of computing Assessed Value
and the system of county and state equalization. The "traditional"
Assessed Value is still required to be 50% of market value. There
shall still be a State Equalized Value (SEV) for each property in
the State of Michigan. Properties of similar value within a township
or city must still have similar Assessed Values. In other words, the
uniformity provisions of the 1963 Michigan Constitution still apply.
The biggest change, starting in 1995, was the requirement to
calculate a Taxable Value for each property in the State of
Michigan. Starting in 1995, property taxes were calculated using
Taxable Value rather than State Equalized Value. It is Taxable
Value, not assessed or equalized value, which is subject to the cap
required by Proposal A.
The Assessor and the Board of Review ARE REQUIRED BY LAW to
increase the Taxable Value by the applicable rate of inflation.
This page last updated:
July 24, 2008
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