“During the last 10 years, property reassessments in Fulton County have increased by 122%. Such mammoth increases are the primary source of property tax increases.”

Bain & Company
Report on Property Taxes
By John S. Sherman, President
Fulton County Taxpayer Foundation

All of us agree that property taxes in Fulton County and Georgia are too high, despite the fact the highly respected Tax Foundation ranks the State of Georgia 37th (among the lowest third) in terms of property tax as a percentage of income, and toward the lowest in all other measurements of property tax burdens.

Two highly-respected legislators have introduced two different approaches toward reducing property taxes. House Speaker Glenn Richardson has sponsored House Resolution 900, a constitutional amendment which, if passed by 2/3 of the state legislature and a majority of the voters, would completely eliminate the current property taxes throughout the state of Georgia, replacing the lost revenue with an income tax of 4% plus a state sales tax of 4% on food, clothes and basic services.

A second plan, sponsored by Rep. Edward Lindsey, District 54, proposes to follow the lead of 42 other states by capping the annual property reassessments by 3% or the rate of inflation, whichever is lower.

Although, much to his credit, Speaker Richardson is trying to alleviate the burden of property taxes, there are some serious problems associated with HR 900:

Local power would be curtailed

Local governments – schools, cities and counties – are more responsive to their citizens than state government. David Brunori, professor of public policy at George Washington University, has recently written: “Relying on political leaders in the state capital to fund local services, such as schools, police, fire, etc. almost guarantees those and other essential public services will be inadequately funded. When your street light is out, your potholes are unfilled, and no one is answering 911, who will you call?”

HR 900 lacks feasibility study

On October 2nd, I called Speaker Richardson’s office to request a copy of the feasibility study on HR 900. I was told by Ms. Charlotte Shockley, administrative assistant to Speaker Richardson, “There is no Feasibility Study at this time.”

How can the taxpayers consider such a drastic change without any specificity on projected annual revenues to cover city, county and school services? Is 4% income tax and 4% state sales tax sufficient? What happens in time of recession when income and sales taxes are significantly reduced? If a city, county or school district is in need of additional funding, it would be completely dependent on the state or would have to raise additional sales tax through a referendum.

Here are the words of Dr. Don Rooks of the Georgia School Boards Association: “The Georgia School Boards Association believes that it would be a mistake to abolish property taxes. Loss of all local funding means reliance on the state for full funding. Local school systems could not generate funds beyond those provided by the state, unless a local school system raises additional sales there axes through a referendum. Under the proposed funding mechanism, how would local school systems overcome existing under-funding and austerity cuts? How would they provide stability of education in times of economic downturn? Overcome the challenges of population growth?”

Citizens control what they spend

Food, clothes and basic services are life’s necessities. The typical middle-class family of four spends $20,384 annually on food alone. At 4% sales tax, the food alone will cost an additional $815.36 per year! Clothing, too, and basic services are necessities that cannot be controlled. What happens in a recession when the state sales tax is increased to 10% or more? Any reasonable person could visualize inner-city poor families rioting against such a burdensome tax.

What states eliminated property taxes?

During the past ten years, seven state legislatures have considered the proposal; but not a single state has passed this type of legislation! In contrast, 42 states and the District of Columbia have alleviated or shifted property tax burdens through freezing or capping assessed property values, property tax rates or property taxes.

Proposed alternative

According to the Association of State Legislatures, 42 states and the District of Columbia alleviate or shift property tax burdens through freezing or limiting assessed property values, property tax rates or property taxes. Of the 42 states with property tax limits, 31 have tax rate limits, 20 and the District of Columbia have caps on increases in assessed property values and 23 have limits on property taxes.

Out-of-control increases in property reassessments are driving property taxes to an unaffordable level for a growing number of Georgia homeowners. In 2005, when inflation was 3.4%, 68.9% of all homeowners in Fulton County had increased reassessments up to 20%, while 30.5% of all homeowners had increases over 20%, including 7.9% of homeowners with increases of over 50%.

Since 1992, increased reassessments have been the primary driver of increased property taxes. The present out-of-control increases are forcing many elderly homeowners on fixed income and many moderate-income homeowners to become delinquent in the payment of their property taxes, causing more home liens and forced sales. Many young first time home buyers are having serious problems meeting their unexpected tax increases.

Representative Edward Lindsey of the 54th District has sponsored a resolution to cap property reassessments—residential, commercial and farm—by a maximum of 3% annually or the cost-of-living index, whichever is lower. This resolution meets the current revenue needs for Georgia’s schools, cities and counties and offers taxpayers a predictable and steady property tax. Equally important, it maintains the local authority of the school districts, the cities and counties.

With each annual reassessment, cities, counties and school districts have shared an annual revenue “bonanza” which has been characterized as “a back-door tax.” With the capping of reassessments, cities, counties and school districts will still be able to increase revenue through the 3% cap or the cost-of-living provision. Moreover, if any city, county or school district needs additional tax revenue, increasing the tax millage will still be an alternative. This will require public discussion and a vote by elected officials, with voters having the opportunity to hold these elected officials accountable.

The capping resolution is co-sponsored by House Majority Leader Jerry Keen, Majority Caucus Chair Sharon Cooper, Ethics Chairman Joe Wilkinson, and many other senators and representatives. Last year, the resolution passed the Senate and was approved by the House Ways & Means Committee. Sadly, a House vote was prevented.

It is in the best interest of the Georgia taxpayers for the Georgia legislature to pass the capping resolution in the 2008 General Assembly and for the taxpayers of Georgia to approve of such capping on the November 2008 ballot.

Buckhead resident John S. Sherman is president of the Fulton County Taxpayers Foundation, non-profit advocacy organization for lowering taxes in Fulton County and the city of Atlanta.