In 1991, the people of Michigan passed Proposal A. It was intended to give tax relief to homestead property owners. A dual structure was developed: one for homeowners (homestead) and one for all others (non-homestead). The homestead tax rate is approximately 40% less than then non-homestead rate. The assessment has two parts as well and applies to everyone. The SEV is typically half the value according to the assessor. The TV is multiplied by the rate. The TV was originally equal to the SEV but only rises 3.5% or the cost of living, whichever is less. Over the course of time, the property value might rise a great deal but the TV remains low and the taxes remained low. When the property sells, the assessor uncaps the TV and it rises to the new SEV based on the selling price.

The calculations below demonstrate the difference in what the taxes might be in an arms length transaction. The hypothetical difference in SEV to TV represents an owner who may have owned the subject property for 20 yrs.