Local units of government raise funds for schools by taxing property. For purposes of taxation, property is divided into two broad groups: real and personal. Real property is comprised of land and buildings. Units of real property are placed into six categories for state and local property tax purposes: residential, agricultural, industrial, commercial, timber cutover and developmental property.[23] Personal property, in contrast, involves for-profit business property that is not attached to a structure. Examples of personal property include machinery, office furniture and equipment (there are specific exemptions for certain agricultural crops, and for residents’ personal clothing, furniture and other household goods).[xi] Units of personal property fall into one of five categories for local property tax purposes: residential, agricultural, industrial, commercial and utility property.[xii]

The property types listed above are important for understanding education revenues because of provisions in Proposal A. These provisions differentiate the taxation rate by property classification.[24] Specifically, under Proposal A, primary residential and qualifying agricultural properties[25] are taxed at a different rate than other properties.[26] This distinction will be relevant throughout the explanation of school revenues.

There are three steps involved in taxing property: assessment, determination of the tax rate and calculation of the individual tax bill.


[xi] MCL § 211.9(1). The list of personal property that is exempted from taxation is quite detailed; the main text provides only a broad outline of the property included. For a more complete list, see MCL §§ 211.9-211.9j.

[xii] MCL § 211.34c(3). The tax rates discussed in this section will not include the state education tax, which is a state government property tax, rather than a local government property tax.