Emerging Issue: Property Tax Reform

Farmers are among the largest owners of real property and pay one of the largest shares of real property taxes in the state. To help ease their burden, in the mid-90s, Michigan created tax exemptions and incentives related to the ownership of agricultural property.

Money raised through property taxes goes toward financing local services; public education; the operation of city, village, township, and county governments; and special projects such as sewers, streets, and parks. All property taxes collected by local units of government, other than the state education tax which is sent to the state School Aid Fund for distribution, are kept locally, and not sent to or used by the state.

With a few exemptions, the tax rate, or millage, is the number of tax dollars the taxpayer must pay for each $1,000 of taxable value. This rate varies by local unit, but certain statewide constitutional and statutory restrictions exist. The rate may not exceed 15 mills ($15 per $1,000), split between a taxpayer’s county, township, and school districts, except in counties in which voters have approved rates of up to 18 mills. Property taxes can be determined by multiplying the total local millage rate by the taxable value of property. A mill equals one one-thousandth of a dollar ($1 of tax for each $1,000 of taxable value). For example, if the local millage rate is 32 mills ($32 per $1,000 of taxable value) and the taxable value is $100,000, the formula would be $32 x 100, for a property tax of $3,200.

A ballot proposal from the Ax MI Tax seeks to end all real and personal property taxes; require 60% of voters to approve local taxes, require a 2/3 vote in the state legislature to increase any state tax to raise revenue by more than 0.1% over 5 years as well as change the distribution of state dollars to local governments for essential services from 15% to 20% and restrict local governments from funding anything other than essential government and infrastructure services.

Michigan Farm Bureau policy supports current law as it pertains to agriculture property and supports lowering or eliminating agricultural property taxes. MFB policy also supports local governments seeking efficiencies through consolidation and streamlining and supports the current township government system and the state not requiring a combining of government services unless the township wants to make that change. Finally, MFB policy supports continued emphasis on state revenue sharing payments to local governments.

Thoughts to consider 

• Since the majority of property tax revenue goes to local governments, how do we balance high agricultural property taxes with the desire to fund local governments? 
• If the state budget is required to distribute more money to local governments and the proposal limits the amount of a revenue increase by requiring a 2/3 vote, could this change jeopardize agriculture’s sales and use tax exemption?
• If property taxes went away, how would this impact PA 116 agreements?
• PA 116 and the Qualified Agricultural Property Tax Exemption are ways to incentivize landowners to keep land in agriculture. Without property taxes would these programs still exist? Without these programs how could landowners be encouraged to keep land in agriculture? 

Policy references

MFB Policy #66 Local Government 

MFB Policy #94 Taxation  

Additional resources

Michigan Department of Treasury Property Tax Calculator

Taxpayer Guide 

Ax MI Tax Petition language