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August 10, 2021
Report 411 | Memorandum 1167

Michigan’s Overlapping Property Tax Limitations Create an Unsustainable Municipal Finance System

  • States generally limit growth of property tax burdens in one of three ways – rate limit, assessment limit, or levy limit. Michigan uses all three, making it among the strictest property tax limitations of the states. Statutory tax rate limits, the Headlee Amendment’s assessment limit, and the taxable value system created by Proposal A all work to limit the growth of tax burdens and constrain year-to-year changes.
  • The Great Recession and its impact on property values led to the overlapping tax limits having a mitigating affect, keeping the tax base from declining further than it could have. Since the Great Recession, which was a unique event, tax bases have been growing at relatively slow rates.
  • The property tax system is not sustainable. Local government tax revenues are constrained in their growth unless they add new development to their tax bases or increase tax rates. Land is finite and cannot continue to be developed. Tax rates are statutorily limited. Local governments need revenue that can grow with their economies.

Michigan law places a heavy burden on the property tax to fund all forms of local government. As this burden grew over the years, taxpayers pushed back with limitations to lessen the impact on their wallets and to create more predictability in annual tax levies.

The analysis shows that Michigan’s tax limitations have protected taxpayers from rapid growth in tax burdens and unpredictable year-to-year changes in tax bills.

Achieving those goals has come at a cost for local governments. The relationship between the property tax base and real estate markets has been diminished. Local governments that are successful in providing quality services benefit very little from the appreciation of real estate values. The primary benefits accrue from new development, but that is not sustainable. Anecdotally, it appears that local governments have reacted to limits on the tax base by seeking approval for new taxes and higher tax rates. That too is not sustainable,

This report uses the benefit of 25 years of actual property value data to evaluate the experience with the tax limitations on both local governments and taxpayers. It illustrates how different types of governments have been impacted by the limitations and explores policy options that could alleviate some of the pressure created by Michigan’s strict limitations.


Kindly consider a $75 donation for unlimited access to this important report.
We have always made all of our publications, whether in paper or electronic format, available to all without charge. We will continue to provide unrestricted access to every publication in our library. 

To ensure continued free access, we are asking YOU to help with a $75 charitable donation (or what you can afford) to the Citizens Research Council of Michigan TODAY to ensure timely and comprehensive updates on Michigan taxes. Donations of any amount are appreciated. Please consider making your donation recurring.
August 10, 2021
Report 411 | Memorandum 1167

Michigan’s Overlapping Property Tax Limitations Create an Unsustainable Municipal Finance System

  • States generally limit growth of property tax burdens in one of three ways – rate limit, assessment limit, or levy limit. Michigan uses all three, making it among the strictest property tax limitations of the states. Statutory tax rate limits, the Headlee Amendment’s assessment limit, and the taxable value system created by Proposal A all work to limit the growth of tax burdens and constrain year-to-year changes.
  • The Great Recession and its impact on property values led to the overlapping tax limits having a mitigating affect, keeping the tax base from declining further than it could have. Since the Great Recession, which was a unique event, tax bases have been growing at relatively slow rates.
  • The property tax system is not sustainable. Local government tax revenues are constrained in their growth unless they add new development to their tax bases or increase tax rates. Land is finite and cannot continue to be developed. Tax rates are statutorily limited. Local governments need revenue that can grow with their economies.

Michigan law places a heavy burden on the property tax to fund all forms of local government. As this burden grew over the years, taxpayers pushed back with limitations to lessen the impact on their wallets and to create more predictability in annual tax levies.

The analysis shows that Michigan’s tax limitations have protected taxpayers from rapid growth in tax burdens and unpredictable year-to-year changes in tax bills.

Achieving those goals has come at a cost for local governments. The relationship between the property tax base and real estate markets has been diminished. Local governments that are successful in providing quality services benefit very little from the appreciation of real estate values. The primary benefits accrue from new development, but that is not sustainable. Anecdotally, it appears that local governments have reacted to limits on the tax base by seeking approval for new taxes and higher tax rates. That too is not sustainable,

This report uses the benefit of 25 years of actual property value data to evaluate the experience with the tax limitations on both local governments and taxpayers. It illustrates how different types of governments have been impacted by the limitations and explores policy options that could alleviate some of the pressure created by Michigan’s strict limitations.


Kindly consider a $75 donation for unlimited access to this important report.
We have always made all of our publications, whether in paper or electronic format, available to all without charge. We will continue to provide unrestricted access to every publication in our library. 

To ensure continued free access, we are asking YOU to help with a $75 charitable donation (or what you can afford) to the Citizens Research Council of Michigan TODAY to ensure timely and comprehensive updates on Michigan taxes. Donations of any amount are appreciated. Please consider making your donation recurring.

Stay informed of new research published and other Citizens Research Council news.
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