The Democratically controlled Michigan House of Representatives recently passed a bill by a 77-31 margin to suspend the so called "pop-up tax" on the sale of a home for eighteen months, with the suspension to be retroactive to March 1st of this year.

Under Michigan's Proposal A, the taxable value of a home can rise annually by no more than 5 percent, or the inflation rate, whichever is lower.  However, when a house is sold, the taxable value becomes uncapped, and increases (or pops-up) to the assessed value. 

This legislation is designed to spur home sales in the state.  And it may do just that.  There are numerous lakefront properties in Northern Michigan with assessed values that are much higher than taxable values.  The lifting of the pop-up tax would be a major incentive to someone considering such a purchase.

To me, this proposal seems too good to be true.  In light of the current budget crisis, who will pick up the tab for this proposal?  It could certainly have serious budgetary implications.  The homebuilders are apparently opposed to this proposal on the basis that it would put them at a competitive disadvantage to anyone considering a new vs. an existing home.

It is interesting to ponder what other unintended consequences this proposal may have.  However, I for one feel that it is refreshing to be considering a tax incentive proposal, rather than a tax increase proposal, for once.  Creative thinking is what will get us out of the economic malaise we are currently experiencing.   

Here is a link to the Detroit News Article.