What: Proposal A, which was approved on a statewide ballot in 1994, set certain property tax changes into the Michigan Constitution. Proposal A limited the yearly property tax increase to be equal to the lesser of the general price level (Inflation Rate Multiplier) or 5%

How: The equation for the Inflation Rate Multiplier is mandated in MCL 211.34d. Each year Treasury's Tax Analysis Division is required to calculate the rate, using the Bureau of Labor Statistics data. The Inflation Rate Multiplier is equal to the ratio of:

1. the average of the 12 monthly U.S. consumer price indexes for all urban consumers for the state fiscal year directly prior to the property tax year divided by
2. the average of the 12 monthly U.S. consumer price indexes for all urban consumers for the state fiscal year prior to the fiscal year directly prior to the property tax year.

This Year: For property tax year 2011, the inflation rate multiplier is equal to the ratio of fiscal year 2010 average consumer price index divided by the fiscal year 2009 average consumer price index. Again, as a result of Proposal A (and therefore under the State Constitution), a property's taxable value cannot increase by more than the increase in the U.S. consumer price index or 5 percent, whichever is less. In addition, a property's taxable value cannot exceed its state equalized value.

The U.S. CPI rate for 2011 property tax purposes is 1.7 percent.

The State Tax Commission (STC) has issued an STC bulletin providing local governments with the inflation rate multiplier to be used to determine the capped value for all property, homestead and non-homestead alike.

Property Inflation Rate Multiplier by Year

Other Resources:

• Property Tax Explanation Webcast
• State Tax Commission Bulletin 2010-16
• The General Property Tax Act (206 of 1893)
• Michigan Property Tax Web Page
• Bureau of Labor Statistics, Consumer Price Index