To understand how taxes are calculated, a look back at
Michigan's history is in order. Until 1994, property in Michigan was assessed
at half its market value for tax purposes. This is known as a property's
assessed value (AV).
In 1994, Michigan voters passed Proposal A, which changed the
state's constitution. Proposal A shifted some of the tax burden off of property
and onto the sales tax, which rose from four ($0.04) to six ($0.06) cents on
every dollar spent.
The result of this proposal was the development of a new way of
calculating property taxes using what's known as a property's taxable value
(TV). A property's taxable value is determined using one of the equations below
(whichever one is less):
·
(((Last year's taxable value) -
(losses)) x (1.05)) + (additions);
OR
·
(((Last year's taxable value) -
(losses)) x (the rate of inflation)) + (additions).
Your taxable value cannot exceed your assessed value.
Under Proposal A, the growth of a property's taxable value is
limited - or "capped" - with annual increases of not more than the
lesser of 5 percent (5%) or the consumer price index (CPI), as adopted by the
Michigan State Tax Commission.
Because of how taxable value is calculated, it is - in many
cases - less than a property's assessed value. However, when a piece of
property is sold or ownership is transferred, the property's taxable value
becomes equal to the amount of its assessed value for the tax year following
the year in which the sale or transfer took place. This is called
"uncapping" a property's taxable value. After this has taken place,
the lesser of 5 percent (5%) or the CPI applies to future increases in taxable
value, until there is another sale or transfer of ownership of the property.
The taxable value for parcels in the City of Norton Shores can
be found on the parcel owner's annual tax bill or assessment change notice.
