A Lansing property has a taxable value of $120,000 at the end of the current year. The Michigan inflation rate (CPI) for the coming year is 3.2%, but the owner believes the cap will limit the increase to exactly 3.2%. Under Michigan's Proposal A, what is the maximum taxable value for the following year if the owner does NOT sell the property?
Correct Answer
A) $123,840, because the cap equals the CPI rate of 3.2%
Under Michigan's Proposal A (MCL 211.27a), the annual increase in taxable value is capped at the lesser of 5% or the rate of inflation (CPI). Since the CPI is 3.2% — which is less than 5% — the cap is 3.2%. The maximum taxable value for the following year is $120,000 × 1.032 = $123,840. The owner's belief that the cap equals the CPI rate is correct in this scenario because 3.2% < 5%.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Various programs and exemptions exist to reduce the property tax burden for specific groups, such as seniors, homesteaders, or veterans.
A transfer tax is a tax imposed on the transfer of ownership of real estate.
Reconciliation is the final step in the appraisal process where the appraiser analyzes the value indications from all applicable approaches and arrives at a single final opinion of value. It is not a simple average of the three values.
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