Talking Taxes – they tell a story, really!

We all have to pay them, that’s the only thing about them that’s straight forward. I have come to the conclusion that certain things are convoluted for a reason. How many of us are going to get Law or Accounting degrees for personal knowledge and use, so they’ve got us there. I’m fiscally conservative so don’t expect much advocation in the buy now pay later plan when someone else is spending my money. Take a look at some of the major taxes we pay in Michigan;  

State Taxes  

  1. Income – Personal Income.
  2. Business – Single Business.
  3. Privilege – Unemployment Compensation, Oil & Gas Severance, Insurance Company Retaliatory, Horse Race Wagering, Corporate Organization, Casino Gaming, Airport Parking Excise, Quality Assurance Assessment Fees.
  4. Sales – Related, Sales, Use, Tobacco Products, Beer, Wine, Liquor, Liquor Markup.
  5. Property – Utility Property, Intangibles, Estate, State Real Estate Transfer, State Education.
  6. Transportation – Gasoline, Diesel Fuel, Motor Vehicle Registration, Other.

Local Taxes  

  1. Income – City Income.
  2. Business Privilege – Casino Gaming.
  3. Sales-Related – Utility Users.
  4. Property – General Property.

The not so funny part of this is; we cannot rely on local, state or federal governments to be on top of things and act according to the best interest of the people. Our best interest is not spending ourselves into unrecoverable deficits. They capitalize when trends are on the rise, they forecast revenue, use the forecast as a budget but are amazingly conservative cutting back with a downward turn. Unfortunately, that’s how we see it as taxpayers. We get limited information and are left wondering or just accept things. Were finances mismanaged (accidently or on purpose)? Was the budget too generous, we rarely know. 

As an example, property values fell dramatically with the housing debacle but did our assessed values go down enough? All three lines (1, 3, & 4) in my tax assessment are more than 50% of market value of my property. Are we paying too much property tax? We are, according to The National Taxpayers Union in this article written by Drew Sygit, here’s a snippet;  

“Each year we file a personal tax return to assess how much income tax we owe. Why is this not the case with property taxes? Did you know many of us pay more annually in property tax than income tax, yet ignore assessing our property tax bills. Just like with income taxes, there are deductions and credits we can take advantage of, and the tax rate is based off the value of your home. If you made $100,000 in income last year and $80,000 this year you would expect to pay less tax. If your home was worth $100,000 last year and now its worth $80,000, would you pay less in property tax or continue to pay too much tax?”  

There’s some pretty creative accounting going on here, even with adoption of Proposal A in 1994. Perhaps nobody thought there’d ever be another recession. Taxable value on your property increases every year no matter what happens with the economy or the housing market. The increase is limited to equal the rate of inflation or 5%, whichever is less and additionally capped by the State Equalized Value (SEV). You can bank on your taxable value increasing by the rate of inflation or up to 5% every year and expect another proposal when they discover this revenue is inadequate.  

Your local assessor decides what your SEV is when you first purchase your home and the taxable value is set at that amount. The SEV is supposed to be 50% of market value.  

Whenever property is sold, government gets a little kickback by re-setting the taxable value to the SEV for the property buyer. This is an automatic change in taxes if you want to sell and re-purchase a new home in Michigan. 

What Proposal “A” Promised  

  • minimum per pupil foundation allowance for schools (in 2003 this number was $6,700). 
  • state taxes (funded in part by a 2% increase of sales taxes) instead of local property taxes were to fund local school district operating costs.
  • more equity among school districts, because the top ten spending districts outspent the lowest ten spending school districts by almost a 3:1 ratio.
  • reduced property taxes to alleviate Michigan’s tax burden of paying 33% more than the national average.

Proposal “A” was a tax reform to ensure more money went into the school system for operating and capital investments. The fund pool was diversely created from; 

  • 6 mill local state education tax (SET) on homestead property
  • 2% sales and use tax
  • 50 cent per package increase (75 cent total) in the cigarette tax rate  
  • 16% on other tobacco products
  • 0.75 percent real estate transfer tax
  • 4.4 percentage of income tax
  • up to an additional 18 mills from non homestead (business, rental, and vacation property) taxes

What Proposal “A” didn’t take into account was the war on tobacco use – higher costs, smoking bans etc. They didn’t consider a recession – less spending, more businesses closing their doors, job losses or the disaster unfurling with the housing market. I think the “plan for the worse, hope for the best” philosophy is what we should really be doing. Bless those politicians, boards and CFO’s who are really trying but they still need our help. Our job is to help them. To keep them accountable we need our presence known and our opinions expressed. If we get more involved with the process we have more of a say about the outcome. Let’s make a better committment to go to Council or Board Meetings, let’s make them a community event!

For those that like graphs decorated with white and black figures, there’s a bunch to look at in this brochure put together by “Business Leaders For Michigan” called Michigan Turnaround Plan…check it out.

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One Response to Talking Taxes – they tell a story, really!

  1. Logan says:

    Don’t forget some of that tax money is needed for repetitive surveys and purchasing property with select private individuals. It was certainly nice of all the Blissfield taxpayers to help purchase the old cannery property so that those private buyers have a chance to make money off that property in the future. I don’t remember voting for these expenditures.

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