Table Six presents three representative examples of homeowners. The examples were chosen to reflect the range of outcomes for typical Michigan homeowners. The urban example assumes the higher millage rates, slower growth in value, and lower home values that are common in Michigan cities. The two suburban examples differ only in the year of purchase of the property, to reflect the differences in property taxes caused by the assessment growth cap.

Case I: Urban Homeowner

The representative urban homeowner's property is assessed at $25,000 SEV in 1992, and pays 37 mills in school operating taxes. With property values growing at 4.5% a year, and school millage rates increasing one mill, the homeowner could expect his SEV to grow to $32,556 in 1997, and school operating property taxes to grow from $925 in 1992 to $1,237 in 1997.

Under Cut and Cap, the SEV growth would be capped at 3% a year, limiting the 1997 SEV to $28,982. Although the school millage rate grows an extra half mill, the 30% exemption reduces the school property tax bite by $456. In addition, the value of the home would increase by $2,969.

Case II: Suburban Homeowner

The representative suburban homeowner's property is assessed at $50,000 SEV in 1992, and pays 33 mills in school operating taxes. With property values growing at 5.5% a year, and school millage rates increasing one mill, the homeowner could expect his SEV to grow to $71,755 in 1997, and school operating property taxes to grow from $1,650 in 1992 to $2,344 in 1997.

Under Cut and Cap, the SEV growth would be capped at 3% a year, limiting the 1997 SEV to $57,950. Although the school millage rate grows an extra half mill, the 30% exemption reduces the school property tax bite by $945. In addition, the value of the home would increase by $5,626.

Case III: Suburban Homeowner Purchasing Property in 1997

This case illustrates the effect of the assessment growth cap on relative tax burdens. The value of the home and millage rate are the same as in Case II; but the home is purchased in 1997 and reassessed based on full market value.

The new purchaser finds her home reassessed at $71,755 SEV, and pays school property taxes of $1,733. Both these figures are 24% higher than the next-door neighbor profiled in Case II. However, even with these disparities, she is still better off in two respects: she saved $611 in property taxes compared with current law, and her home is valued $5,625 higher.[27]

This example illustrates a larger disparity than typically would be the case. It assumes a high-valued property, in a fast-growing area, and a full reassessment in the year of purchase.[28] Most disparities would be smaller, but some would be larger. The example also illustrates the fact that, even when paying more property taxes than a neighbor, a new purchaser under Cut and Cap would still enjoy considerable savings in property taxes, and increases in homeowner's equity, when compared with current law.