Gov. Whitmer is proposing a property tax break that would provide refunds of up to 10% for Michigan senior citizens. The governor is one of many politicians seeking solutions to homeowners’ high (and rising) property tax burdens.

But targeted tax breaks for favored voting demographics will not solve the problem. Michigan imposes heavy property taxes, and state leaders should lower that burden for everybody. Owners’ effective rates remain 27 percent higher than the national average, according to U.S. Census Bureau data.

Worse, progress on reducing property tax burdens stalled more than a decade ago. Between 2010 and 2018, Michigan’s property tax effective rates declined from 47 percent higher than the national average to 27 percent higher. Unfortunately, the ratio has not improved since.

Leaving aside our lack of competitiveness against other states, Michiganders are just plain paying higher rate property tax rates. Even after adjusting for inflation, statewide property tax burdens as a percentage of property values have risen by about 16 percent over the past ten years for which data are available, 2015 to 2024.

Some lawmakers want to address that problem. That is to their credit, but few are proposing meaningful, long-term property tax relief.

Michigan’s constitution already contains limits on property taxes. The Headlee Amendment lowers rates when property values increase more than inflation. Michigan also has an annual assessment limit designed to ensure that an individual’s property assessment increases by no more than the rate of inflation. Neither has worked to keep property tax rates from going up.

Language in the Headlee Amendment makes it possible for rates to increase faster than inflation. The amendment does not apply to the 6-mill state education tax, nor to any millages imposed to pay for bonded projects. Local governments have routinely turned to bonding (for which voter approval is often forthcoming), and this shifts tax burdens from the capped operating budget to the uncapped budget for general obligation bond payments. Many jurisdictions also create “special assessment districts” with assessments designed to avoid Headlee tax reductions.

The annual assessment limit lowers property taxes for some at the price of exorbitant property taxes on potential first-time homebuyers, among others. It benefits long-time residents but costs the people who move into the state or purchase new homes.

Taxpayers know the current system isn’t working as advertised. They can see it on their property tax bills. They want a legislative solution.

Rather than target the source of the problem — high property tax rates — the governor and some lawmakers are pushing targeted relief that merely shifts burdens and complicates meaningful long-term tax reductions. Rate reductions across the board can be hard, while exemptions for some and targeted reductions for others make for an easier political lift.

Targeted tax relief narrows the tax base, benefiting a select few and distorting housing markets by driving up prices and shrinking supply. Rate relief, by contrast, benefits all taxpayers.

Economists generally regard the property tax as the most efficient major tax. It does less economic harm and introduces fewer distortions than income or sales taxes. When well designed, a property tax better conforms to the benefit principle, wherein tax burdens at least roughly correspond to benefits received.

None of this justifies unnecessarily high property taxes. It is, however, a good reason for lawmakers to be careful not to replace the current system with something worse.

When states provide additional aid to favored groups to offset property tax burdens, or even when they directly abate property tax bills through credits, they reward jurisdictions with higher property taxes and often incentivize further rate increases.

If lawmakers want to deliver real relief, they should focus on lowering rates, not narrowing the base. Carving up the base is the easier path politically, but it won’t deliver true long-term relief. Broad-based rate relief is fairer, delivers longer-term benefits, and better promotes economic growth.

Voters already have the ability to lower their property taxes, because local governments’ property taxes are subject to voter approval. Yet those approvals often come in low-turnout May and August elections. Lawmakers can ensure that the millages receive real popular support by scheduling these elections in November.

Lawmakers could also reduce the state’s six-mill levy and eliminate authorization for special assessments, which in practice have been abused as Headlee Amendment workarounds.

Michigan property taxes are too high across the board, and the current system offers governments too many ways to raise taxes. Officials in Lansing should deliver real property tax relief, not targeted programs that pick winners and losers while doing nothing to curb the overall growth of Michigan’s high property tax burdens.

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