"Cut & Cap" is a constitutional amendment, placed on the 1992 ballot by a petition drive headed by Governor John Engler. It would do the following:

  1. Reduce the effective rate of property taxation by exempting 30% of the value of property from school operating property taxes, with the exemption phased in over five years. School operating property taxes comprise about 60% of property tax revenue in the state, so a 30% reduction results in an average reduction in total property tax rates of about 18%.

  2. Limit the annual increase in the assessed value of each parcel of property to 3% a year or the rate of inflation, whichever is less. until the parcel is sold, at which time it would be reassessed based on market value.

  3. Reimburse local school districts for the reduction in operating revenue due to the exemption from school operating property taxes. The reimbursement would conic from the state treasury, and would be limited to that due to millage rates levied in 1991 or the then-current year, whichever is less.

  4. Reimburse units of local government to insure that contractual obligations for certain Tax Increment Financing Authorities (TIFA's) and other authorities are not impaired.

The complete text of the proposal is contained in Appendix V.