Friday, February 12, 2010

Michigan Has Seen Better Days; Proposals For Change

Michigan ranked as the seventh worst state, with one default and auction notice or foreclosure filing for every 258 homes in January. Michigan is the worst in the nation with the highest unemployment rate. The state unemployment rate is currently at 14.6%. The state also has a 1.5 billion dollar deficit. What is being proposed to help solve the state from swirling even farther down the drain.

Gov. Jennifer Granholm's proposed a new sales tax on services. The tax proposal would reduce sales tax from 6% to 5.5%, and expanded to 168 services Michigan does not tax, such as accounting and legal services, landscaping, auto and home repairs, dry cleaning and tickets to concerts, movies and sporting events. The tax would not apply to health care, education, construction, real estate commissions, insurance premiums or business-to-business transactions. The proposed service tax purpose is to avoid more cuts to public schools, and a tax on doctors to improve Medicaid health care to low-income Michigan residents. The revised sales tax would pump an additional $550 million to schools next year.

Citigroup Inc. plans to let homeowners on the verge of foreclosure stay in their homes for six months, if they turn over the deed to their property. Citi is launching the pilot program, "Foreclosure Alternatives," this week in Texas, Florida, Illinois, Michigan, New Jersey and Ohio. The program is intended to help borrowers who don't qualify for a mortgage modification or a short sale have a less severe hit to their credit score. Initially, about 1,000 homeowners are expected to participate. Borrowers in Citi's program will still need to pay their utility bills. But Citi will pay at least $1,000 in relocation costs and will consider helping out with other expenses. Citi also plans to provide relocation counseling.

Proposal A, which limits annual increases in property taxes. Under Proposal A, property taxes can increase only up to 5% or the rate of inflation so long as the same person owns the home in question. However, if the ownership of the home is transferred, the taxable value of the house can rise at a much greater rate. The stated purpose of Proposal A was to provide incentives for homeowners to remain in the same home, encouraging neighborhood stability while simultaneously keeping the tax burden on homeowners low. The taxable value of a home is limited in the amount it can increase. During periods when the value of real estate is rising, this provides significant savings for taxpayers.

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