A proposal to raise Fulton County’s homestead exemption could mean property tax relief for tens of thousands of homeowners. Or it could mean tax cuts for some property owners and tax hikes for others.
The result will depend on what, if anything, the Georgia General Assembly passes this week, and perhaps on the outcome of future court battles.
North Fulton Republicans have proposed doubling the county’s property tax homestead exemption to $60,000. That would mean the owners of homes worth up to $150,000 would pay no county property taxes, and tens of thousands of others could see significant tax cuts.
Republicans also have proposed suspending the county Board of Commissioners’ ability to raise the property tax rate for the next two years and requiring five votes on the seven-member commission to pass a tax hike thereafter. That would force commissioners to cut spending instead of raising the tax rate to offset the $48 million they expect to lose annually because of the higher homestead exemption.
But some Democrats say the Republicans’ plans could backfire if the new homestead exemption passes but the tax rate cap doesn’t pass or is challenged successfully in court. If Fulton officials raised the tax rate to prevent cuts to popular services, commercial property owners and the owners of more expensive homes – many in north Fulton – would bear much of the burden.
Republicans say that’s not going to happen. They expect both bills to pass and the tax rate cap to survive any legal challenge. They say the proposals would grant needed tax relief and force the county to trim spending.
“I absolutely would not want to see a shift in the tax burden,” said Rep. Jan Jones, R-Milton, who sponsored the tax proposals. “We want a reduction in the tax burden.”
But the uncertainty has made some commercial real estate professionals nervous.
“We’re concerned that increasing the homestead exemption will disproportionately shift the property tax burden on the commercial (property owner),” said Robert Broome, government affairs director for the Atlanta Commercial Board of Realtors.
The property tax proposals are two of a series of Republican bills designed to reshape Fulton County. Some of the others would make it easier to fire county employees, make the elected tax commissioner an appointed position and redraw commission districts to give north Fulton residents a greater say in county government.
But the property tax proposals would have perhaps the greatest impact.
A homestead exemption excludes a portion of a home’s value from taxation, and taxes are based on 40 percent of the home’s value, the assessed value. So under Fulton’s current $30,000 homestead exemption, the owner of a $75,000 home pays no property taxes because the assessed value is $30,000.
Under House Bill 541, Fulton voters would decide in 2014 whether to raise the county’s homestead exemption to $60,000 over three years.
Under the higher exemption, about 61,000 homeowners would not have paid any county property taxes last year because their homes were worth $150,000, though they still would have paid school, city and state taxes. About three out of four of those who would have paid no taxes lived in Atlanta or south Fulton, an Atlanta Journal-Constitution analysis found.
Tens of thousands of other homeowners would have received a tax cut. The owner of a $300,000 house, for example, would have seen a $308 cut.
County officials say that tax relief would mean cuts to Grady Hospital, libraries, senior citizens programs, nature centers and other popular services.
“Yeah, you might have a little money in your pocket when you go down to Kroger,” County Commissioner Bill Edwards told south Fulton residents at a recent community meeting. “But you can’t call Kroger when you’ve got to go to the hospital.”
Republicans don’t buy it. They say Fulton can cut spending and still have money left over for key services like Grady and libraries.
“There’s plenty enough money for that,” said Rep. Ed Lindsey, R-Atlanta.
Fulton officials say they’ve cut spending in recent years. And while other metro Atlanta counties have raised tax rates in recent years, Fulton hasn’t raised its tax rate since 1991. But county official might be tempted to raise taxes to make up at least part of the $48 million they would lose to a higher homestead exemption.
That’s where the second property tax bill comes in. House Bill 604 would suspend Fulton commissioners’ ability to raise the property tax rate until Jan. 1, 2015. Thereafter, a tax hike would require a supermajority of commissioners.
Some Democrats say the measure violates a state law granting home rule to county governments.
“It’s going to be fought out in court,” predicted Rep. Roger Bruce, D-Atlanta.
Republicans say the measure is legal. Jones cited a 1951 local amendment to the state constitution that allows the Legislature to suspend Fulton commissioners’ ability to raise the tax rate.
“Folks have had these concerns (about Fulton’s tax rate) for 60 years, and not much has changed,” Jones said.
Even with no tax increase, Broome said raising the homeowners’ exemption would still shift the tax burden to commercial property owners. And with fewer homeowners paying taxes, those who live in north Fulton - where home values are generally higher - would pay a greater share of the county tax burden, according to Commission Chairman John Eaves.
The homestead exemption increase already has passed the House of Representatives and is awaiting action by the Senate. The tax cap is awaiting action in the House. The legislative session is scheduled to end Thursday.
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