Under Proposal A, what happens when a property is sold?

When a property is sold in Michigan under Proposal A, the property becomes uncapped, which means that its taxable value aligns with the state equalized value (SEV) at the time of the sale. This is significant because Proposal A was established to limit the growth of property taxes by capping the taxable value of properties to the rate of inflation or 5%, whichever is lower.

When a property is transferred, this cap is lifted, allowing for a reevaluation of the property's taxable value based on its current market value. This process ensures that new owners pay taxes that are reflective of the property's true market value rather than potentially outdated assessments.

This mechanism is vital for maintaining equitable tax assessments across properties and prevents long-time homeowners from holding benefits that may have been accrued from the earlier capping rules. The uncapping process could lead to an immediate increase in taxes for new buyers, but it’s framed within the context of aligning the taxable value with the current market assessment.