Support tax reform plan and cut spending

The voter on the Speaker’s Property Tax Reform Amendment is supposed to take place sometime today. As much as it pains me to say it, because I know this is nothing more than the Speaker saving face and I don’t believe the Speaker has the best interest of the taxpayers of Georgia at heart, this seems like a good bill and we should encourage our legislators to vote for it. However, House leadership must address spending at the state level. Without spending reform or guaranteed spending cuts, this tax reform is only a tax shift.

The Republican Liberty Caucus of Georgia is now taking this position on part of the plan:

One component of property tax reform the Georgia RLC has endorsed SR 796, which would limit the rate at which property value assessments can be raised. No longer will local counties and municipalities be able to increase taxes through back door re-assesments. If this constitutional amendment were passed by voters in November, local county and city leaders would be forced to vote to increase taxes.

The Georgia RLC strongly encourages our members to contact their representatives today and urge them for support SR 796.

This is not an endorsement of the Speaker’s proposal, though that may be forthcoming.

17 comments

  1. Goldwater Conservative says:

    So now we are letting voters decide if they are going to be taxed and how. When are we going to let the people decide how appropriations are made and start voting to give themselves money from the treasury?
    The state’s fiscal problems (caused by the GOP) are not going to carry over into the GOPs political popularity…why are they doing these types of things? Don’t they know that this is GA and it does not matter what you believe in as long as (R) is next to your name on the ballot?

  2. BobG says:

    The RLC should first take a little time to learn how Georgia’s property tax system works. If they understood the basics, the RLC might not be so quick to endorse SR796.

    As a former Chairman of a county Board of Equalization who was trained extensively in property tax matters, I can prove MATHEMATICALLY that proposals such as Sen. Chip Rogers’ constitutional amendment to impose a statewide assessment freeze will not only fail to accomplish its stated goals but will actually HARM Georgia’s most vulnerable property owners while providing a lucrative tax advantage to the most affluent.

    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.

    I can PROVE that assessment and millage “freezes” will ELIMINATE future property tax cuts and will FORCE tax increases that might otherwise be avoided.

    Admittedly, Georgia’s tax law is broken. There is no requirement that taxing authorities simply “do the math” and follow the procedure for calculating the millage rate 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.

    The so-called “back door tax increase” is the NOT the result of rising assessments. It happens because taxing authorities do not adopt a mathematically-correct millage rate. If they were, the “back door tax increase” would be eliminated. As assessments increase, the millage rate would DECREASE simply as a process of the math, as long as officials hold the line on the cost of government.

    SR796 will not solve this problem. Even after passage, Georgia taxpayers will still pay tax at a rate that has no mathematical connection to the cost of their government. And Georgia’s tax law will have been complicated even further.

    The truly sad fact is that Chip Rogers KNOWS this because we have discussed it in detail. He KNOWS that his proposal will cause unfairness in the tax system. He KNOWS that there is a simpler, better solution. But because he is a politician, first and foremost, he has chosen to push his politically-popular, albeit flawed legislation.

  3. jsm says:

    “So now we are letting voters decide if they are going to be taxed and how.”

    1. Where’s the “if” part?
    2. Voters deciding how they will be taxed is a good thing.

    BTW, voters deciding appropriations limits might be a good thing, too.

  4. Jason Pye says:

    So now we are letting voters decide if they are going to be taxed and how.
    Ever heard of SPLOST?
    When are we going to let the people decide how appropriations are made and start voting to give themselves money from the treasury?
    In many respects, this is already the case. People have been voting themselves money from the treasury for years. Social Security, Medicare, Medicaid, SCHIP and pork projects are both examples of this on the federal and state level.
    I don’t particular like the restrictions on local government and I don’t like factionalism and I don’t want local governments to spend more…but there is a mechanism there, through a ballot question, to allow local governments to increase spending if need be.

  5. Tea Party says:

    @BobG: I am disheartened to read your insights. Folks, this guy has it right.

    Stop spending the money we don’t have on stuff we don’t need or want.

  6. StevePerkins says:

    I tend to agree with Bob Griggs on this one. While he may be cut-n-pasting older arguments from back when this was a pure “freeze”, this current incarnation of the plan is effectively a freeze over time because counties’ increases are capped at a level lower than that of inflation. This has a few consequences.

    For one thing, people who are overtaxed now won’t get any relief… because: (1) counties have no incentive to lower the millage rate (quite the opposite), and (2) even if counties wanted to lower someone’s millage rate, they couldn’t because they’re unable to raise the undertaxed-guys’ rates to compensate. If you’re being screwed today, you’ll still be screwed tomorrow… this bill simply freezes you in the state of being screwed.

    Secondly, having increases capped at below inflation means that you’d need a referendum every year to avoid cutting school funding. At the end of the day, that’s REALLY what the whole thing is about. Big-L/Small-l libertarians and right-wing types can’t convince people to do away with public education, so the new strategy seems to be slowly choking it off instead.

    Sigh… maybe I should stop prefacing many of my arguments with, “I may be a libertarian, but…”. I guess I’m really a common-sense moderate. I oppose massive entitlement spending and imperialistic foreign policy… but I am (gasp!) okay with public education. Public schools aren’t great, and I strongly support public-private partnerships such as charter schools… but we’re better off having public education then we are having a country where 90%+ of kids get no education at all. Maybe I’m “communist” (along with 99% of Western civilization, apparently). It’s just that many of the arguments that sounded pretty persuasive when I read “Atlas Shrugged” in high school seem downright CHILDISH and silly as I grow older.

  7. Goldwater Conservative says:

    Nevermind Jason…I forgot that you kids these days are more interested in making a point and need referencing for almost everything that existed prior to the Internet.

  8. I understand what Bob is saying and I appreciate what he’s doing to try to educate people about this issue.

    That being said, government officials don’t think about taxes as being necessary to cover the cost of government they look at it in terms of what they can spend. They crave rising property values so the amount of money they can spend will increase without the political pain of being forced to increase the millage rate.

    Forcing politicians to increase the millage rate if they want more money might actually force a debate on what the proper millage rate should be and move us more toward the system Bob desires.

  9. landon says:

    Does anybody on the blog know how much more this plan will change after the House passes it?

    I just hope they take the car tax away, and keep a statewide assessment freeze. If Republicans want to continue to make gains, they need to cut, not just redistribute taxes.

  10. BobG says:

    Steve, the same ‘cut and paste’ that applies to a complete ‘freeze’ applies to the ‘freeze plus 3%’ of SR796; the ‘freeze plus 3’ is, of course, not quite as restrictive but still introduces inequity into the tax system.

    I invite you to read the article here (http://www.millagerate.com/blog/?p=34 ) that I wrote a couple of years ago about HR-162, a ‘freeze plus 3%’ proposal. If you don’t have time, here is an over-simplification:

    Two homes bought on the same day, one in a slow-appreciating area (2% a year, for example) and one in a faster growing area (5% a year) of the same jurisdiction.

    Because the 2% appreciation of the ‘slow’ home is below the 3% cap, the owner will suffer the full impact of the rising assessment. The owner of the faster-appreciating home will benefit by 2%.

    Here’s the inequity: the appreciation is based (arguably) on Fair Market Value (FMV). As the years go by, the owner of the ‘slow’ home pays every year on 40% of their FMV; however, the owner of the ‘fast’ home has gained a few percentage points a year. After just a few years, that taxpayer will be paying taxes on 30-35% of FMV.

    That’s unconstitutional… unless, of course, you make inequity constitutional by passing SR-796.

  11. BobG says:

    Buzz, if you require taxing authorities to adopt a mathematically-correct millage, the rate rises as falls as the relationship between the Net Tax Digest and the cost of government changes. Reductions in spending will almost always result in a tax cut… no keeping the millage the same, no increasing it unnecessarily… a real tax cut.

    If the taxing authority is a fast-growing area, a mathematical millage (and no ‘freeze’) will allow them to respond to the need for services to support the growth and yet still maintain a reasonable tax rate. For example, if the digest grows by 5% in a particular year but the politicians hold the increase in the cost of government (if any) to less than 5%, the taxpayers receive a tax cut… automatically, as a function of the math.

    Only if the cost of government increases at a faster pace than does the Net Tax Digest (NTD) will the millage rate increase.

    With a mathematical millage, there are no artificial restrictions on the NTD or on the millage; local government officials are allowed to respond to the unique needs of their community.

    Because the millage rate goes up or down each year based on the politicians’ ability to control spending, it becomes an annual indicator to the voter of the quality of the politicians’ stewardship.

    I should point out that a mathematical millage is not MY idea… I have simply described at MillageRate.com a process for calculating the millage rate that has been taught by the Department of Revenue to tax commissioners, appraisers, assessors and Board of Equalization members for decades. Today, we face a crisis in the property tax system because of a flaw in the current tax law– local taxing authorities are not required to “do the math.”

    All of the proposals to date– Roy Barnes’ `Taxpayers Bill of Rights` millage rollback to the current ‘freeze’ proposals– are completely ineffective and very harmful– and THAT is not just my opinion… it is just a product of the math.

  12. BobG says:

    Landon, an assessment ‘freeze’ does not CUT taxes. It redistributes them, just as you fear.

    If you study the example at http://www.millagerate.com/blog/?p=34, you will see how the tax burden is transferred from the owner of the faster-appreciating home to the owner of the slower-appreciating home.

    The amount that the government collects is not reduced, just taken from same pockets but in different amounts.

    Again, that’s not my opinion– it’s just an operation of the math.

  13. Goldwater Conservative says:

    At the very least, this plan prevents the loss of some revenue. If values are frozen then any depreciation of property values will be offset. The plan still sounds half-baked.

  14. IndyInjun says:

    My ideal would be to eliminate all property tax exemptions on the taxation side, with a mathematically-correct millage and to slash spending, even on the education side.

    Until the spending becomes excruciatingly painful to the people – it soon will be due to the exploding inflation – nothing will change.

    A property assessment freeze might not be seen as too bright, if housing prices start to FALL.

  15. eburke says:

    The problem with the current calculation of the millage rate is that the General Assembly has monkeyed with the system to make it too complicated for most to understand. Instead of making the process transparent it clouds it and has the effect of allowing taxes to go higher.
    Repeal the TABOR and the rollback provisions for LOST, Insurance Premium Tax, incorporated millage rates and unincorpated millage rates . Then calculate a simple formula based on total budget, minus other revenues equals amount needed from property tax. Divide that amount by the digest value and you have your millage rate. Want to cut the millage rate, then you cut the budget or come up with other revenue sources.

  16. BobG says:

    eburke, you are correct. You have described the correct process for calculating the rate, explained here: http://www.millagerate.com/howto.htm .

    Jason, a mathematical millage is the only way to put local officials “on the record” regarding their ability to control spending.

    Here’s a “worst case” scenario, to illustrate how the system could be gamed even if an assessment freeze were to pass– a city council, facing a referendum to raise the millage rate by one mil, decides to take the risk and ask for a two-mil increase so that they won’t have to face votes for tax increases two years straight.

    There is no law that prevents them from adopting any rate that the voters will approve, regardless of whether they need the money or not.

    Further, Jason, with a freeze tax CUTS will be a thing of the past. No taxing authority will risk lowering a millage rate when they know that they will have to put an increase to a referendum.

    An assessment freeze will kill the tax cut.

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