Michigan House Republicans on April 22 introduced a broad property tax reform package — House Bills 5872-80 — aimed at reshaping how property is taxed across the state. The nine-bill package proposes significant changes that would affect homeowners, businesses, utilities, and local governments alike.
While the proposals are being positioned as tax relief and modernization efforts, early analysis indicates substantial fiscal implications for counties and other local units of government — particularly due to the absence of clearly defined, guaranteed reimbursement mechanisms for lost revenue.
Eliminating the ‘pop-up’ tax
A central component of the package is the elimination of the residential “pop-up” tax. Under current law, when a property is sold, its taxable value resets to match its current market value — often resulting in a noticeable increase in property taxes for the new owner.
HBs 5872-80 would eliminate this reset, allowing taxable values to continue growing at capped rates regardless of a sale. While this change would provide predictability and relief for home buyers, it would also slash future property tax growth for local governments.
Notably, the legislation does not include a stated mechanism to reimburse local governments for the resulting loss in revenue.
Expanding Personal Property Tax exemptions
The package includes a sweeping expansion of the Personal Property Tax (PPT) exemption. It would eliminate taxes on all equipment, including utility equipment that is not currently exempt under Michigan law. The bills will not take effect, however, unless the bills requiring the corresponding lowering of utility rates are enacted.
This represents a major policy shift. PPTs have historically been a key revenue source for local governments, particularly in communities with significant industrial or utility infrastructure.
To offset these losses, the package has a new funding model: revenue from a newly created tax on services would be deposited into a dedicated fund. These dollars would be distributed first to the School Aid Fund, with remaining funds allocated to counties and other local governments. Included in the reimbursement model is a proposed 3 percent increase in the reimbursement going forward. However, questions remain about the adequacy, stability and long-term reliability of this approach. The prioritization of the School Aid Fund also raises concerns about whether local governments would be made whole. If there is adequate funding for this reimbursement, and the revenue exceeds the model in the bill, all additional funds would transfer to the state’s General Fund.
Eliminating the state’s Real Estate Transfer Tax
Another provision in the package would eliminate the state’s portion of the real estate transfer tax. This tax is currently applied when property changes ownership and contributes to state revenue. The county portion of the real estate transfer tax is not being eliminated.
MAC response and ongoing review
The Michigan Association of Counties is reviewing the legislation and its potential impacts. While we are open to thoughtful tax policy discussions, local governments were not consulted in this proposal. MAC will continue to consistently emphasize the importance of protecting county revenue stability.
Counties rely heavily on property tax revenues to fund essential services, including public safety, courts, health departments, and infrastructure. Unlike the state, counties must operate within balanced budgets and have limited ability to replace lost revenue.
As House Bills 5872-80 move through the legislative process, discussions are expected to focus heavily on fiscal impacts and the structure of proposed reimbursement mechanisms.
For counties and local governments, the stakes are significant. The outcome of this package will determine not only the future of Michigan’s property tax system, but also the financial stability of the local services residents depend on every day.
For more information on this issue, contact Deena Bosworth at bosworth@micounties.org.