With Home Values Going Down, How Can Property Taxes Still Go Up?

By: Tony Tagliavia Email
By: Tony Tagliavia Email

"I can't afford it any longer. I just can't do it," Glen Peterman said.

Peterman is worried that ever-increasing taxes could price him out of the Ionia County home he's lived in since just after World War II.

"Somewhere around 1947," he recalled.

Showing us his property tax bill, Peterman points to a substantial jump in the home's assessed value from last year to this one.

The upside of a higher assessment is that, in theory, you could sell your house for more money. But with the way the Michigan housing market is right now, many say, they couldn't.

"No way," Peterman said. "If anybody wants to buy it, they can do it for a lot less."

But thanks to Proposal A, his home won't be taxed based on the current market value.

The 1994 ballot initiative that shifted the school funding burden away from property taxes means Peterman isn't subject to big increases when property gets pricier.

But it also means that, in most all cases, property taxes go up each and every year.

"The current market has revealed a flaw in our property tax law," State Rep. Brian Calley (R-Portland) said.

At a meeting with Peterman and other constituents in Ionia Monday night, Calley said his concern is simple: when property values go down, taxes shouldn't be able to go up.

"People are getting taxed out of their houses," Calley said.

So he's proposing a change to the state consitution that would mean in years when property values aren't going up, taxes would have to stay flat.

That should apply to years like this one, according to real estate broker Robert Cusack.

"The market's going down," he said. "There are more foreclosures than ever. And I have several parcels that will not sell for what the assessed value is."

Local governments likely won't like the plan -- just because the housing market is down doesn't mean they need less money to do what they do.

And those annual taxable value increases are limited to either 5 percent or the rate of inflation, whichever is lower. This year, inflation was used, meaning a 3.7 percent increase.

But folks like Glen Peterman say in an economic downturn, they can't afford to pay more taxes every year by default.

"No," he said. "Can't do it. Absolutely not."

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