by Robert J. Schneider

As I mull over the idea of paying more taxes if Proposition 1 passes tomorrow, I can’t help but think that, instead of piling more taxes upon the poor schnook who already pays through the nose, wouldn’t it be great if those who are not taxed at all, in any way, shape, manner or form, could join the crowd and pay their fair share.

And I am not talking about what you may think.

I sent this proposal to the Governor and my state representative and state senator last Fall. My senator, to his credit, actually met with me about it, but so far there has been no action on the idea that I am aware of. I know the political process takes time, but a few more voices might speed things up.

If you have a couple of minutes to read my proposal, let me know what you think:

A Proposal to Increase Revenue in Michigan by Amending the Property Tax Law

1. Synopsis:

The laws of the State of Michigan should be amended to require the payment of property taxes on severed property rights.

2. Predication:

Surface property owners are required to pay property taxes in order to maintain ownership of their land. Such taxes are calculated at 50% of the State Equalized Valuation multiplied by the applicable millage rate. Non payment of property taxes will result in confiscation of the land by the taxing authority.

A majority of surface property owners do not have complete ownership or control of their parcels of land, due to the reservation of oil, gas, mining, mineral, wind energy, solar energy and other rights to their land by previous owners.

It is virtually impossible for most buyers to obtain the rights described above when purchasing parcels of land. In a majority of cases these rights are retained by corporate interests, many of them nonresident to Michigan.

These “severed property rights” are superior to the surface owner’s rights, and, if exercised, drastically reduce the surface owner’s ability to use, enjoy or resell the property and negatively affect the value of the surface property. The surface owner has inferior legal status to the holder of the severed property rights. The exercise of severed property rights may also result in environmental issues requiring involvement of the state at taxpayer expense.

Severed property rights are not subject to any form of taxation. They may be retained in perpetuity without cost, and are not in jeopardy of confiscation for any reason.

3. Justification:

It is clearly and simply unfair for the inferior property owner to be taxed under threat of confiscation, while the superior property owner is free of all taxes.

4. Proposal:

A. That state law be amended to apply property taxes to severed property rights at the rate of 25 percent of the State Equalized Valuation of the surface property, minus the taxable value of any buildings on the property, multiplied by the applicable millage rate. The intention of this provision is that the holder of severed property rights would pay property taxes equal to one half of the property taxes the surface owner of the same parcel would pay on the unimproved land only.

B. That the owner of the severed property rights may choose to pay the taxes or may instead abandon such rights and be exempt from such tax.

C. That the surface property owner have first right of refusal to acquire abandoned severed property rights and rejoin them to the surface property. The surface property owner shall be notified in writing if severed rights are abandoned and be granted a grace period of not less than one calendar year to reclaim them.

D. That the State Equalized Valuation of surface property be raised by 10% if abandoned severed property rights are reclaimed and restored. The 10% multiplier shall not apply to the taxable value of any buildings on the property.

E. That abandoned severed property rights revert to the State of Michigan if not reclaimed by the surface owner during the grace period.

F. That the State of Michigan make payments in lieu of taxes on severed property rights it holds to local units of government in the amount of 50 percent of its payment on comparable surface parcels of land.

G. That property taxes on parcels of land upon which no rights have been severed as of the effective date of these changes will not be affected in any way.

H. That the revenue collected from taxes on severed property rights be earmarked for public education or for public roads and infrastructure.

5. Conclusion:

The application of all property taxes exclusively to the surface owner is unfair. The surface owner is subordinate to the owner of severed property rights, yet the owner of such superior rights is exempt from all taxes. Requiring the payment of property taxes on severed property rights is just and fair. The additional revenue from this measure would increase funds available for public purposes.