According to Proposal A, how can a property's taxable value increase annually?

The correct answer states that a property's taxable value can increase annually by the rate of inflation or 5%, whichever is less. Under Proposal A, adopted in Michigan in 1994, the purpose was to limit the increase in taxable value to provide more predictability for property owners while also responding to inflation.

This mechanism is designed to ensure that property owners are not subjected to sudden, excessive tax increases due to rapid appreciation of real estate values. By allowing increases based on the lower of the two metrics—either the inflation rate or a maximum cap of 5%—it provides a form of protection for taxpayers, especially during periods of high inflation.

The other choices do not accurately reflect the parameters established by Proposal A. For instance, suggesting that taxable values could increase by the rate of inflation or 5% whichever is greater would contradict the intent of the proposal, which is to limit increases. Similarly, while improvements made to the property do indeed affect a property’s assessed value, under Proposal A, a property's taxable value is not directly linked to its assessed value beyond the annual cap mentioned. The assessed value of nearby properties does not influence an individual property's taxable value; instead, it reflects the value of the specific property in question.