Taxpayers within the WISD will provide $30.3 million of revenue to Washtenaw County schools at a net cost of only $21.2 million due to offsetting federal tax deductions and homestead tax exemptions.

The “exporting” of property taxes is an important consideration when assessing the consequences of taxes. In the case of this proposed millage the taxpayers within WISD have the opportunity to provide $30.3 million per year for the education of children and young people at a net cost of only $21.2 million per year.

Three tax provisions are responsible for most of the exporting. 1) Businesses deduct the property tax as a business expense. If the added expense reduces net income, the taxes on the business and the owners of the business fall. This offsets a portion of the property tax. 2) The State Property Tax Credit provides a rebate for a portion of the property taxes for households with incomes of less than $82,650 and who satisfy other criteria. The credit rebates 100 percent of the added property tax for many households containing elderly or disabled persons. 3) The deductibility of property taxes on the Federal Income Tax Form enables extensive tax exporting. Using an example as a means of explanation, a household that a) itemizes deductions, b) is in the 25 percent marginal income tax bracket, and c) experiences a property tax increase of $100 will also experience a decline in their federal income tax of $25; the net tax increase is $75.

The proportion of the property tax that is exported depends on the income and wealth of the households in the jurisdiction. Because the State Property Tax Credit rebates a higher proportion of the tax than does the provision for itemized deductions on the federal income tax form, the proportion exported is inversely related to average household income. AAPS taxpayers export 27 percent of their property taxes and the taxpayers within WISD and not within AAPS export 33 percent of their property taxes – with the result that WISD taxpayers as a whole export 30 percent of their property taxes.

The following table summarizes gross taxes, exported taxes, and net taxes.

Gross, Exported, and Net Taxes for All Business and Homeowner Property
Within the WISD by AAPS and the Other Nine Local Districts on an Annual Basis

The “bottom line” is that taxpayers within WISD will, if the proposed millage is passed, enable $30.3 million of expenditures to preserve the quality of education within WISD at a net cost to themselves of only $21.2 million.