Not everyone wants property taxes frozen.

Bob Griggs writes in Sunday’s AJC:

Tax assessment “freezes” create inequity and unfairness in the property tax system. With a freeze, some taxpayers pay a higher percentage of their property’s fair market value in tax than do others.

Sen. Chip Rogers’ amendment (SR-796) would actually REMOVE the constitutional requirement that all homeowners be taxed equally! No longer would taxing authorities be prohibited from arbitrarily overtaxing one Georgia citizen to the benefit of another.

Assessment freezes cause their greatest harm to lower-income homeowners, including the elderly and those on fixed incomes.

Assessment freezes also penalize those who remain in older neighborhoods.

This is easily illustrated, which leads me to conclude that our legislators simply do not understand how the property tax process works.

The millage rate is the key to Georgia’s property tax system. (One “mill” is $1 of tax on every $1,000 of taxable value. ) When properly calculated, the rate ensures that property owners pay no more and no less than is required to fund the cost of their government.

Correctly calculated, the millage rate ensures that, as property assesments increase, the tax rate must decrease, as long as politicians hold the line on the cost of government.

However, Georgia’s tax law is broken. There is no requirement that taxing authorities simply “do the math” and follow the procedure that has been taught for decades to tax commissioners, appraisers and assessors, and Board of Equalization members across the state.

A recent study showed that fewer than one out of 10 cities, counties and school boards adopt a mathematically correct millage rate. As a consequence, the taxpayers in the overwhelming majority of Georgia’s cities and counties are either overtaxed or undertaxed —- it MUST be one or the other.

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15 comments

  1. suwtiger says:

    That is 100% correct. Freezing property values will set us up to be another Florida where when I lived there two homeowners right next to each other in similar size houses, paid much different amounts in tax. It really became a point of friction onthe street because the new people were really upset that they were paying sometimes double what their neighbors were paying just beacuse they just moved in over the last couple of years. In addition to that, people that wanted to downsize or move to a nicer house became “landlocked” because if they moved , thier tax values would reset and thier tax bill would go through the roof, even if they moved into a smaller house. I think Florida just voted to try and fix some of the same screw ups we are about to make. I hear the changes made to fix the value freeze problems that have been going on in Florida might be ruled illegal and thrown out. I think the writer is on to something worth looking at.

  2. Burdell says:

    I think this gets to the heart of the problem with basing things on “Fair Market Value.”

    FMV is not the market price. It’s a fictional estimate by the government. The market creates value by pairing a willing buyer and seller who both benefit from the exchange. If an elderly person, for example, never plans to sell their home, then the home has no real market value, because there isn’t a willing seller at any price.

    FMV gets around this inconvenience by arbitrarily imposing a “value” on the home, and taxing the property at a higher rate than its actual value.

    So what’s the solution? Simple: do away with FMV. Tax a home on the value the current owner paid for it, adjusted for inflation. Simultaneously, cap growth in government spending, to eliminate the temptation to raise the millage rate.

    This system would be fair, because it would tax every homeowner at what their house is actually worth. Once someone else buys the home, they would be taxed at this new value, because it has been objectively determined.

  3. Tea Party says:

    “Simultaneously, cap growth in government spending, to eliminate the temptation to raise the millage rate.”

    Burdell, that IS good but will it ever happen?

    SUW excellent perspective.

    School boards must be made accountable, we have a ‘value-gap’ in education, and nobody is willing to address the issue. “for the children, you know…”

  4. eburke says:

    leave the tax code alone except to repeal all the exemptions, the vote out the SOB’s who can’t control the size of government at the local and state levels. The more the General Assembly tampers with the ad valorem tax, the more complicated they make it and the more inequitable they make it as well.

  5. The Warsaw Ferryman says:

    I’d like to toss out a very simple (almost Slingblade-ish in its form) hypothetical about this situation which has always been in the back of my mind. Please forgive me for the random order in which it is presented…..

    If your city relies on property taxes for two-thirds of its revenue and a city freezes the property values of the residential side (assuming one-half is residential) that means one-half of two-thirds only grows if new construction is going on (not everybody’s favorite thing, by the way.) Basically, you freeze the revenue for one-third of your budget.

    So, inherently wouldn’t that mean that one-third of the funding for public safety departments would be frozen? And eventually business catch on that their taxes are disproportionately higher than the jurisdiction next door. Not exactly officer “friendly,” is it?

  6. Burdell says:

    Tea Party,

    I think it could happen if one party or another (I really don’t care which at this point) made it a central platform.

    You know, real fiscal responsibility. Something tells me voters might just go for it.

    Maybe I’m just naive. The fact that the state is even considering proposals like this means that most local governments are NOT being fiscally responsible.

    The change really has to start locally, and I don’t know why it’s not.

  7. BobG says:

    Burdell, in an equitable system it actually matters not what value is used (FMW, 40% of FMW, etc.) as long as the SAME value is used for ALL equally-situated properties. The problem with an assessment freeze is that this equity is removed.

    Your argument is the same made by Rep. Lindsey Edwards last year for HR-162, which is similar to this year’s freeze proposals. You can read my response here: http://www.millagerate.com/blog/?p=35

    It is not practical to cap government spending… especially local spending from the state level. Local governments should not be so hamstrung, but they should be held accountable. That’s exactly what a mathematical millage requirement would do. The millage would go up or down each year depending on the politicians’ ability to control spending. It would (rightfully) be left to the voters to pass judgment on their success or failure.

    eburke– although it will never happen, removing all exemptions would promote equity in the tax process. Taxable value would be returned to the Net Tax Digest, providing the opportunity to lower the millage rate for all.

    I invite all to visit http://www.millagerate.com for an explanation of a simple SOLUTION to the problem of “back door tax increases” due to rising assessments.

    It really is this simple– just require cities, counties and school boards to DO THE MATH.

  8. jsm says:

    This whole issue just continues to shed light on why property taxes are wrong. This whole struggle is based on having to pay the government to keep something I own. This should not be the basis of taxation, and lawmakers and local leaders are not willing to explore a real, workable change in how state and local taxes are collected and distributed.

    As long as people are taxed purely for owning something–no matter their income or personal wealth–this fight will go on.

  9. Tea Party says:

    @Warsaw Ferryman: You nailed what is happening with the incorporation issue…perhaps inadvertantly:

    ” What if my city is not yet a city , rather only a state of mind called Dunwoody.” The local print media is barely beginning to understand what the business community is saying, “What does incorporation cost us?” Residential tax increases will be capped at 1 mil, unless voted higher.

    The proposed Dunwoody budget is reedy and thin; it will be unable to accomodate material contingencies. Thus, budget deficits HAVE to be paid by businesses. Businsses DO NOT vote on incorporation.

    Stay on target:

    Vote NO to MORE Government
    Vote NO to HIGHER taxes

    @Burdell That true budget reductions do not happen locally is to defeat a basic Economic Truth: Government Grows.

  10. BobG says:

    JSM, property taxes may be wrong but not for the reason you state.

    The property tax is imperfect because it doesn’t reach to ALL who use or benefit from government services. But it shouldn’t be eliminated because property owners do receive significant benefits from government including the most basic– if there was no government, there would be no property ownership! Anarchy would reign and the land would belong to the strongest, which might not be you!

    Government should be funded by as wide a range of sources as possible with no overwhelming dependence on any one source. Further, government should take in no more and no less than is required to fund the services that are desired by the people.

    “User fees” should be emphasized where possible… impact fees on new development will shift the cost of new public infrastructure, in part, to those who create the need for and will use the infrastructure… a sales tax for general operating costs will reach non-property owners and non-residents…. and the remainder, if any, would be funded by a real property tax.

    The idea is to develop a system that spreads the cost of government to as many of those who benefit from it as possible.

  11. cheapseats says:

    So, state government wants to call local spending out of control – that’s the first joke about “pot meet kettle”.

    State wants to cap local property tax growth at 2% yet the Red Team in charge cannot keep their own growth down to even twice that amount – even while short-changing education and health care.

    Why don’t we just have a constitutional amendment that requires hypocrisy from the state government? I mean, if they’re going to act so hypocritical then, let’s just make it constitutionally mandated. Kinda like making it permanent “opposite day” in Georgia.

  12. jsm says:

    Bob, I didn’t say ‘imperfect.’ I said property taxes are ‘wrong.’ The idea of taxing someone based on ownership of property rather than taxing based on income, sales, or even a basic fee is Marxist. Essentially, local government owns all ‘private’ land and even uses it to back bonds.

    I’m talking about the core basis for taxation–not so much sources of government revenue. If I choose to buy a large tract of land, my decision should not be hampered by whether I can afford to pay the government enough to keep it.

  13. Burdell says:

    Bob, thanks for your reply.

    Where I disagree is that I don’t think “fair market value” adequately evaluates what constitutes “equally-situated properties.”

    Property whose owner does not want to sell at any price cannot be fairly said to be equally-situated with any other property.

    If we redefine FMV as “what the current owner paid for the house, adjusted for inflation” the inequity is eliminated. Everyone who buys similar properties in the same market will probably be assessed at similar values, but those values will always reflect what the property is actually worth, not just a mechanical estimation of what the property *might* be worth.

    I will read the discussion you linked to, though.

  14. BubbaRich says:

    Burdell,

    I like your plan, if it’s used for your primary residence only. I don’t like it as a way to protect your hopes of getting rich off of secondary residential property, and I really don’t like it as a way to hold on to expensive business property. But it’s a good way around the problem of running people out of their homes with community improvement.

    I’ve seen opposition to community improvement here in Doraville, based entirely on not wanting to increase the assessed value of their own home.

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