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HB 5873

Property tax: state education tax; state education tax; eliminate. Repeals 1993 PA 331 (MCL 211.901 - 211.906). TIE BAR WITH: HB 5880'26

2025-2026 Regular Session Introduced by Joe Aragona and 17 co-sponsors

HB 5873 would repeal the six-mill State Education Tax, shifting SAF funding reliance away from SET revenues and requiring annual General Fund appropriations to offset the loss.

REFERRED TO COMMITTEE ON GOVERNMENT OPERATIONS
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Bill Summary · HB 5873

Summary of HB 5873 (Michigan, 2025-2026)

Purpose and intent

  • HB 5873 seeks to repeal the State Education Tax Act (SETA), enacted as 1993 PA 331 (MCL 211.901–211.906).
  • The repeal would remove a six-mill state education tax on property that is not exempt under the General Property Tax Act, with revenues currently directed to the School Aid Fund (SAF) for local school district operating purposes.
  • The bill states the Legislature’s intent to annually appropriate sufficient General Fund dollars to the SAF to fully compensate for any revenue loss resulting from the repeal.

Key provisions and changes

  • Repeal: The State Education Tax Act (MCL 211.901–211.906) would be repealed.
  • Effective date: The repeal would take effect 90 days after enactment.
  • Taneged tie-bar: The bill is tie-barred to House Bill 5880 and cannot take effect unless HB 5880 (proposed services excise tax) is enacted.
  • Funding commitment: Enacting section 4 expresses legislative intent to annually appropriate General Fund money to the SAF to offset revenue losses from the SET repeal.
  • Administrative note: The SAF currently receives 100% of SET revenues; losing those revenues would reduce SAF resources unless offset by other funding mechanisms.

Affected parties and fiscal implications

  • Affected revenue: State Education Tax proceeds (six-mill levy) would be eliminated from the SAF.
  • SAF impact: The SAF would experience a loss of SET revenue beginning in FY 2027 (estimated at $3.1 billion) and FY 2028 (estimated at $3.2 billion) based on January 2026 Consensus Revenue Estimating Conference projections.
  • Offsetting mechanism (contingent): HB 5880 would create a services excise tax. Revenues from that tax would fund a Property Tax Savings Reimbursement Fund, which could, in FY 2027, transfer to the SAF an amount equal to the SAF’s 2026 SET receipts, subject to inflation adjustments in future years (not to exceed CPI and not to exceed 3%).
  • Net effect: The elimination of SET would likely shift revenue from property taxes to other state revenues and potentially increase individual income tax receipts (due to reduced value of the homestead property tax credit), but the exact impact is uncertain.

Procedural and timeline details

  • Effective date: 90 days after enactment.
  • Tie-bar: The act is tied to HB 5880; neither measure would take effect unless both are enacted.
  • Legislative process: Bill introduced and referred to the Government Operations committee; analysis and sponsor information provided by the House Fiscal Agency.

Practical implications and questions to monitor

  • Whether HB 5880 passes and the structure of the proposed services excise tax, since it would determine the availability of funds to offset SAF losses.
  • The sufficiency of annual General Fund appropriations to the SAF to replace SET revenue, given competing state priorities and budget constraints.
  • Long-term impact on the SAF’s ability to fund school operations and any unintended consequences for local districts and homeowners (e.g., changes to homestead credits and overall tax burden).
  • Administrative timing: Full fiscal year impact would begin in FY 2027, assuming an effective repeal date and the tie-bar conditions are satisfied.

Compiled from official sources — confirm details with the bill’s official record.

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