Policy Research

Tax Base Erosion and Inequity from Michigans Assessment Growth Limit: The Case of Detroit

Timothy Hodge, Mark Skidmore, Gary Sands, Daniel McMillen

Summary

The article examines the housing market in Detroit focusing on the effects of the assessment value cap in Proposal A. The study finds that the assessment value cap has caused houses with owners who have stayed in their house for longer periods of time to face a significantly smaller tax burden than houses that are more recently purchased. This effect is exacerbated further for lower income households.

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Policy Implications

This article can be used to help in crafting potential reforms to assessment and revenue laws. This study suggests considering the disparities in tax rates faced by homes of comparable value when designing future policy. Additionally it suggests that removing the cap initially for just new homeowners could help ease reform for homeowners and allow for tax rates to catch up with each other over time.