Property taxes 101

The role of government is to provide for the health, safety and welfare of its citizens. To fulfill this role, governments at all levels need resources to provide goods and services.

The role of government is to provide for the health, safety and welfare of its citizens whether that’s at the federal, state, or local level. In order to fulfill this role, governments at all levels need resources to provide the goods and services needed by its residents. 

Enter taxes. Taxes are money paid by citizens to support the role of government. It may be income tax, sales tax, or property tax and usually is all three plus many more. Currently, there are 59 taxes that may be levied on Michigan residents: 38 state taxes and 21 at the local level.

With the semi-annual property tax season upon us, let’s learn a little more about how property taxes evolved into what we know (and love?) today.

The earliest evidence of property taxes goes back to the Greek era around 600 B.C. The word census came from the Romans because they prepared the first assessment rolls. Property taxes disappeared during the feudal system period because subjects of the landed aristocrats paid rent through “in kind” service taxes or a portion of their agricultural yields. When the feudal system declined, it marked the reemergence of the government’s or crown’s need for revenue. This is when the property tax emerged as the principal revenue source for government. Property taxes were imposed on all types of property, including livestock and personal belongings.

During the colonial period in the U.S., property taxes began as a supplement to the poll tax. The poll tax was a tax levied on voting adults in the colony. The faculty tax also emerged at this time as a tax on a citizen’s income earning capacity, skill or trade and was an equally important source of revenue as the property tax. 

In the Northwest Territory, the property tax was also an important source of revenue. In fact, Michigan’s property tax is termed “territorial tax” because its requirement was outlined in the Northwest Territory Land Ordinance of 1785 and 1787. 

Personal property, as well as real property, was taxed in Michigan until the mid 1940’s when personal property tax was eliminated for households but retained for businesses and industry. (Note: The personal property tax on businesses and industry was eliminated when Michigan voters supported Proposal 1 in the August, 2014 primary election.) 

Currently, property tax is calculated annually based on the formula of the number of mills (1 mill = $.001) for a community times the taxable value of the property. For example, if your community levies 15 mills and the taxable value of your property is $100,000. Your property tax formula is .015 X $100,000 which equals $1500.00. Property taxes are billed on July 1 (summer) and December 1 (winter) and payable on a date determined by whether you live in a city or township. 

Property taxes remain the largest single source of revenue for local units of government even if cities levy an income tax on its residents. The administration of property taxes is a joint effort between local municipalities, county government and the state.

For information on property tax administration, see the second artile by Michigan State University Extension, Property Taxes 101 – Part Two.

For an outline of all state and local taxes assessed in Michigan, see “Outline of the Michigan Tax System

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