No. Under “Proposal A” the taxable value of a home is capped at 5% per year or the rate of inflation, whichever is less. When a home is sold, and the market value of that home is higher than the capped taxable value, the taxable value is re-set to current market rates. This often means the purchaser of an existing home pays more in property tax than the previous owner.

However, under the 1978 Headlee Amendment to the Michigan Constitution, local municipalities must roll-back or lower overall property tax millage rates as a result of increased taxable values. This means that while an individual home purchaser may pay more in property taxes than a previous owner, the increase in taxable value from the sale of that home will lower the overall tax rate for all other residents in the community. The net result is that the City of Petoskey does not see an increase in property tax revenue from the sale and increased taxable value of a home.

As a result, since voter approval of Proposal A, increases in the tax base of local units of government can happen in only two ways: through the rate of inflation or 5%, whichever is less, or with additions of values though new construction.