The Fight for Fair Property Tax Assessments

January 27, 2020

The core of tax policy is very simple; you have a tax rate and a tax base. Luckily, local property tax rates, often expressed in the form of mills, require a vote of the people to ratchet upwards and are constrained by certain Constitutional protections. The tax base calculation, on the other hand, is not as simple. While the way the tax base is calculated has evolved into a complex and complicated science, it is still subjective. We are seeing more and more local units of government exploit this subjectivity to the detriment of taxpayers. If you cannot raise the rate, increase the base in which the rate is applied.

The most recent attempt by local units of government to manipulate the tax base calculation was seen in the Senate Finance Committee last week during a hearing on Senate Bill 46. After years of fighting over the depreciation tables on energy generating windmills, Gratiot County persuaded their state senator to introduce legislation codifying an unfair and ambiguously substantiated depreciation table for these pieces of tangible personal property. Obviously, the depreciation scheme prescribed in SB 46 would result in a windfall of revenue for local units of government.

Consider this unprecedent action for a moment. Not only would this be the only asset with a legislatively set depreciation table, it is blatantly unconstitutional. Furthermore, it sets a precedent where any taxpayer or industry who appeals their over assessment on any type of property is going to find themselves in front of a legislative body who will take it upon themselves, in their infinite wisdom, to set a depreciation table of their own. To heck with true cash value! It has only been the standard in which we’ve based the property tax system on since 1893.

Windmills today, certain retail property yesterday, and solar tomorrow and who knows from there. Whether it is codifying depreciation tables that unfairly benefit local governments or requiring preferential use of a specific appraisal methodology (talking about the cost approach here for specific commercial property), the fight for fair property tax assessments continues and the Michigan Chamber will always be at the forefront of every battle.