Michigan taxpayers will pay over $9 billion in property taxes in 1992 – more than the sales tax and income tax combined. Almost 70% of property tax revenues go to local public school districts, with the rest split between cities, townships, counties, community colleges, and other local authorities.
By any measure, Michigan's property tax burden is much higher than the national average. While the exact ranking among the 50 states varies with the year and the measure, Michigan consistently ranks in the top 15 states for property tax burdens on their citizens.
A recent survey by the Senate Fiscal Agency recorded Michigan's property tax burden on two important scales.
Property Taxes per $1,000 of Personal Income: This measure, from the U.S. Census Bureau, is probably the best measure of the relative burden of taxes. In fiscal year 1990, Michigan ranked 10th among the 50 states with $47.09 in property taxes per $ 1,000 of personal income The national (50-state) average was $35.62. Michigan's high burden also placed it second among the 12 Midwestern states.
Property Tax Effort Index: This sophisticated measure developed by the Advisory Commission on Intergovernmental Relations takes into account the tax revenue raised and the value of property that is taxed. For 1988 (the latest year available), Michigan's index of 157 was the second highest among the SO states, which had an average index of 100.
The Senate Fiscal Agency study also notes that Michigan's property tax burden would still rank among the top 15 on both these scales if "Homestead" income tax credits were assumed to reduce the property tax burden. Other studies have also shown Michigan's property tax burden to be much higher than the national average.
Since property taxes are almost entirely local taxes in Michigan, this high state average includes communities with more reasonable burdens, as well as those with stratospheric property tax rates. In particular, Detroit was rated the city with the highest property tax burden on a typical family among the largest cities in all SO states and the District of Columbia.
In addition to high property taxes, Michigan has consistently endured a much higher overall state-and-local tax burden than most other states. The income, business, and property taxes are significantly higher in Michigan than in most other states, while the sales tax is somewhat lower. However, Michigan's total state-and-local tax burden, while still above the national average, has recently become much closer to the average of the other states, for two reasons: First, other states have raised taxes, while Michigan has not; and second, Michigan's economy has not grown as rapidly as other states, and therefore has not generated the same increase in tax revenue.