Before Proposal A was approved by the Michigan voters on March 15, 1994, all property taxes in the state were based on Assessed Values (AV) which represent 50% of the true cash value (or market value) of all properties as of December 31st of the previous year. If the market value of your property is $186,000, then the assessed value of your property should be 50% of that market value or 93,000. After the county and state review the assessed values in each taxing jurisdiction they become State Equalized Values (SEV).
One of the most important changes that occurred with the passage of Proposal A was a limit placed on the percentage that property taxes can increase each year. This limitation was accomplished by creating a new term called “Taxable Value.” Taxable Value (TV) is defined as the lesser of a property’s SEV or “Capped Value.” A property’s Capped Value (CV) is defined as the previous year’s taxable value increased by the inflation rate or 5%, whichever is less, plus construction changes.
The State Tax Commission (STC) determines this inflation rate each year. What this tax system has meant for most residents is that if you have not purchased your home in the previous year and have not made any physical additions to your property (like building a garage), your property taxes will not increase by more than the previous year’s inflation rate or 5%, whichever is less.