By Chip Rogers
Georgia’s property tax system is a broken relic of a bygone agrarian-based economy. It fails every test of what constitutes good tax policy. It is not transparent, it is not easy to understand, it is not fair, it is not flat and, worst of all, it does not facilitate accountability.
The most logical plan would be to scrap this 19th-century taxation model and move to one designed for a 21st-century economy. Sadly, few in elected office are willing to embrace this much-needed change, so the least we can do is add accountability. Property tax assessment caps offer real accountability.
Currently in Georgia there are two major variables in the mathematical equation to determine a property owner’s tax liability. The first variable is assessed value, as determined by the assessor. The second variable is the tax (millage) rate, determined by the local governing body.
This year, Georgia legislators have proposed capping increases in assessed value at a maximum 3 percent per year. This effectively removes one of the variables in the equation.
Why is a property tax cap a good idea? Because it would require elected officials to publicly cast a vote if they want to raise your property tax above 3 percent. This is real accountability – forcing elected officials to actually vote whether to raise or lower taxes. With no caps in place property taxes can rise dramatically simply by increased assessments.
Opponents suggest such caps are not fair. They claim when a property has increased in value, based upon the opinion of a government employee, the property owner should be forced to pay more in taxes.
It is important to note that no other form of taxation is based on an “unrealized” gain. Owners of stock don’t pay a tax based upon the most recent stock quote. Instead, tax is paid on the actual market value of the stock at the time of sale.
Perhaps the most troublesome feature of the current property tax system without assessment caps is that taxpayers essentially are punished for the actions of others. We would never accept this from other forms of taxation. Can you imagine an income tax law where you’re required to pay more because your neighbor received a pay raise? This is exactly what happens under the current property tax system.
Consider this scenario. Mr. Smith and Mr. Jones live next to each other on identical 10-acre lots. One day Mr. Jones decides to sell his land to a developer, take his profit and retire to Florida. The developer divides Mr. Jones 10 acres into 20 one-half acre lots. The developer builds 20 homes and sells them at $400,000 each. Everyone wins except Mr. Smith. The local tax assessor determines Mr. Smith’s 10-acre lot has now doubled in value. That dramatic increase in assessed value has occurred even though Mr. Smith has done nothing to change his property. Mr. Smith receives his property tax bill and now owes twice as much as the previous year. Of course, the local elected officials can accurately claim they did not raise the millage rate. But this is of little solace to Mr. Smith whose property tax bill increased 100 percent because of the actions of his neighbor.
Property assessment caps can fix this problem. If the local governing body wants to double Mr. Smith’s property tax they must vote to do so. In turn, he can vote to throw them out of office. It’s called accountability and it’s a beautiful thing in government, especially when it pertains to raising taxes.
Chip Rogers, Georgia Senate Majority Leader, wrote this commentary for the Georgia Public Policy Foundation. The Georgia Public Policy Foundation is an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.
© Georgia Public Policy Foundation (February 13, 2009). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.
By Chip Rogers
Georgia’s property tax system is a broken relic of a bygone agrarian-based economy. It fails every test of what constitutes good tax policy. It is not transparent, it is not easy to understand, it is not fair, it is not flat and, worst of all, it does not facilitate accountability.
The most logical plan would be to scrap this 19th-century taxation model and move to one designed for a 21st-century economy. Sadly, few in elected office are willing to embrace this much-needed change, so the least we can do is add accountability. Property tax assessment caps offer real accountability.
Currently in Georgia there are two major variables in the mathematical equation to determine a property owner’s tax liability. The first variable is assessed value, as determined by the assessor. The second variable is the tax (millage) rate, determined by the local governing body.
This year, Georgia legislators have proposed capping increases in assessed value at a maximum 3 percent per year. This effectively removes one of the variables in the equation.
Why is a property tax cap a good idea? Because it would require elected officials to publicly cast a vote if they want to raise your property tax above 3 percent. This is real accountability – forcing elected officials to actually vote whether to raise or lower taxes. With no caps in place property taxes can rise dramatically simply by increased assessments.
Opponents suggest such caps are not fair. They claim when a property has increased in value, based upon the opinion of a government employee, the property owner should be forced to pay more in taxes.
It is important to note that no other form of taxation is based on an “unrealized” gain. Owners of stock don’t pay a tax based upon the most recent stock quote. Instead, tax is paid on the actual market value of the stock at the time of sale.
Perhaps the most troublesome feature of the current property tax system without assessment caps is that taxpayers essentially are punished for the actions of others. We would never accept this from other forms of taxation. Can you imagine an income tax law where you’re required to pay more because your neighbor received a pay raise? This is exactly what happens under the current property tax system.
Consider this scenario. Mr. Smith and Mr. Jones live next to each other on identical 10-acre lots. One day Mr. Jones decides to sell his land to a developer, take his profit and retire to Florida. The developer divides Mr. Jones 10 acres into 20 one-half acre lots. The developer builds 20 homes and sells them at $400,000 each. Everyone wins except Mr. Smith. The local tax assessor determines Mr. Smith’s 10-acre lot has now doubled in value. That dramatic increase in assessed value has occurred even though Mr. Smith has done nothing to change his property. Mr. Smith receives his property tax bill and now owes twice as much as the previous year. Of course, the local elected officials can accurately claim they did not raise the millage rate. But this is of little solace to Mr. Smith whose property tax bill increased 100 percent because of the actions of his neighbor.
Property assessment caps can fix this problem. If the local governing body wants to double Mr. Smith’s property tax they must vote to do so. In turn, he can vote to throw them out of office. It’s called accountability and it’s a beautiful thing in government, especially when it pertains to raising taxes.
Chip Rogers, Georgia Senate Majority Leader, wrote this commentary for the Georgia Public Policy Foundation. The Georgia Public Policy Foundation is an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.
© Georgia Public Policy Foundation (February 13, 2009). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.
