Nastas III: Time to provide relief for overtaxed Michigan families
Why should we punish people for buying a house?
Many Michigan families pay far more in income, sales, and property taxes than the value of the services they receive from state and local government. These families would be much better off spending more of their tax dollars on family needs than having those dollars taken by government. High taxes encourage Michigan families to move to low-tax states and discourage families from moving within or to Michigan.
For example, if a family moves within Meridian Township from a 1,300 square foot home to a 2,700 square foot home, the family may see its local property tax increase from $2,500 to $8,000 per year. The annual tax increase for buying a larger home is $5,500 (or more than $55,000 over 10 years). Associated with this move is a real estate transfer tax of more than $2,500. The value to the family of these incremental taxes is zero.
The local property tax and real estate transfer tax are based on the sale price of the home, not the home’s market value.
The sale price includes transaction costs such as the real estate sales commission, real estate transfer tax, and title insurance fee; costs that can make up seven percent or more of the sale price. So, the family must pay the local property tax and real estate transfer tax on sale transaction costs, as well as the market value of the home.
The family pays the property tax on sale transaction costs for as long as the family owns the home.
If the Meridian Township family appeals its property tax assessment, the family may find a review board that is made up of current or retired government workers – hardly an impartial group to hear property tax appeals. If the family appeals its property tax assessment to the State Tax Tribunal, the family will not find an impartial review.
Much can be done to cure the heavy state and local tax burden on Michigan families. State government can reduce the cost of buying and owning a home by:
• Eliminating the real estate transfer tax.
• Capping the local property tax on personal residences at a low, fixed amount (to cover common government expenses).
• Eliminating the annual property tax increase.
• Placing more of the cost of government services on those for whom the money is spent. Seniors and individuals and couples without children would not pay school taxes.
• Requiring local property tax elections to occur only during general elections.
• Allowing only residential property owners to vote in property tax elections.
• Requiring a majority of residential property owners to approve a property tax increase.
• Defining the local property tax election as permission to assess each residential property the same tax amount, independent of taxable value.
The Legislature and the governor can make Michigan a more affordable place for families to live, rear children, and work. Now is the time for Michigan tax relief.
-George Nastas III lives in Haslett.
