Michigan House Passes Property Tax Overhaul That Would Reshape Muskegon Homeowner Bills and County Revenues

The Michigan House of Representatives passed a sweeping eight-bill property tax package this week that would eliminate the state portion of property taxes, repeal the real estate transfer tax, and end the "pop-up tax" that spikes bills for new homeowners. The legislation passed on a party-line vote of 57 to 45 and now heads to the Democratic-controlled Senate.

For Muskegon homeowners, the package would mean an estimated $1,400 in annual savings per household, according to Republican State Rep. Josh Shriver of Oxford. That figure includes roughly $900 in state property tax savings and $500 in reduced utility bills from provisions that would require electric and natural gas companies to lower rates.

But the savings come with a steep price tag for state and local governments. The House Fiscal Agency estimates the package would eliminate between $5.4 billion and $5.8 billion in annual tax revenue. Muskegon County and other local governments rely on property taxes for roughly half of their revenue, according to a recent MLive analysis.

The Pop-Up Tax Would End

The package includes House Bill 5872, which would eliminate Michigan's pop-up tax. Under current law, a home's taxable value is capped at a 5 percent or inflation increase each year. But when a property changes hands, the taxable value resets to the full state equalized value, which is roughly half the market price.

That reset can nearly double a new homeowner's tax bill overnight. State Rep. Ann Bollin, R-Brighton Township, wrote in a column published by Crain's Detroit Business that a home selling for $300,000 with a previous taxable value of $80,000 would see its taxable value jump to $150,000 the following year. At a 40-mill tax rate, the new owner would owe roughly $6,000 annually instead of $3,200, an increase of about $233 per month.

HB 5872 would end that uncapping mechanism beginning in 2027. The Michigan Association of Counties (MAC) called the move a "growing structural erosion of the local tax base" in a legislative update published May 22.

"Of particular concern to counties is the proposal to eliminate the 'pop up' in taxable value when property transfers ownership. This policy would not only reduce local property tax revenues immediately, but the losses would compound year after year as each new property transfer permanently carries forward a lower taxable value," MAC said in its update.

Muskegon's Voice in the Budget Fight

Rep. Will Snyder, D-Muskegon, serves as a House appropriator and was recently interviewed on WOODTV's "To The Point" about the ongoing budget process. Snyder is part of the Democratic caucus that voted against the property tax package.

House Democrats have argued that the revenue losses would fall hardest on roads, infrastructure, and schools. State Rep. Donavan McKinney, D-Detroit, told CBS Detroit that the proposal is not responsible.

"Now, when you lower property taxes, you're going to impact other funding mechanisms. For our roads, for our infrastructure, for our schools, they're going to be disproportionately impacted by this legislation, whether our Republican colleagues know it or not," McKinney said.

The Services Tax That Has Not Been Voted On

Most of the property tax bills would not take effect unless lawmakers also pass House Bill 5880, which would create a new 6 percent tax on services. Revenue from that tax would flow to schools and local governments as a replacement for the eliminated property taxes.

The House has not yet voted on the services tax bill. The House Fiscal Agency has not issued a revenue estimate for it.

Senate and Governor Await

The eight-bill package now moves to the Michigan Senate, which is controlled by Democrats. Senate Appropriations Committee Chair Sarah Anthony, D-Lansing, has said she does not want to begin budget negotiations by raising taxes.

"When we talk to people across the state, people are hurting right now. So, we didn't want to start negotiations talking about raising taxes. That feels a little tone deaf when folks are worried about whether their healthcare will be addressed or whether they can put food on the table," Anthony said.

The Senate's own budget proposal totals $88.1 billion, roughly $12 billion more than the House plan, according to Michigan Public. A final state budget must be adopted by July 1 under state law.

If the property tax package clears the Senate, it would go to Gov. Gretchen Whitmer for her signature or veto.