The House took action on eight bills to reform property taxes that reduces funding to local governments and schools with no revenue replacement mechanism. The legislation approved would eliminate the pop-up or uncapping for all property upon sale, eliminate the six mills State Education Tax, eliminate the state real estate transfer tax and eliminate ALL personal property taxes (including utility personal property taxes). The bills approved were:
- House Bill 5872 would eliminate the uncapping or “pop-up” tax when the property is sold. Currently, when a property is sold, its taxable value resets to match the current market value.
- HB 5873 would eliminate the six-mill State Education Tax.
- HB 5874 would repeal the state real estate transfer tax.
- HBs 5875, 5876 and 5877would amend statutes to reflect the repeal of the state real estate transfer tax.
- HB 5878 would eliminate ALL personal property taxes, including utility personal property taxes.
- HB 5879 would require public utilities to provide a correlating reduction in residential rates.
The bills moved through the House Government Operations Committee in approximately five minutes and were passed by the House, mainly along a party-line vote, late Wednesday. Given there was no opportunity to testify, MTA submitted a letter of opposition outlining the fiscal concerns with the funding reductions in HBs 5872 and 5878 due to the substantial long-term fiscal impacts they impose on local units of government. Any revenue proposal must include full reimbursement along with a growth component to maintain critical services for communities long term. While the proposed reimbursement mechanism, HB 5880, was not considered, it doesn’t provide guaranteed replacement funding. The bill states local governments would receive any remaining revenue after schools were held harmless and the amount would be prorated if insufficient.
Fiscal projections estimate a $4.9 billion reduction in total tax revenue for the state, local governments and schools.
MTA remains committed to collaboration with the Legislature and the governor on property tax reform solutions that strengthens the long-term sustainability and reliability of the reimbursement structure for local governments. The passed proposal does not provide a reliable, stable funding source for Michigan’s local governments or schools. The bills have been transferred to the Senate where their future is uncertain; however, property tax reform could be tied to the final budget agreement.