So, you buy a house for $250,000. Six months later somebody buys the place next door for $275,000, and three months later, the home down the street goes for $300,000.
Next year, you get a statement from the county assessor saying — for tax purposes — your house is now worth $287,500, based on neighborhood market trends. And you think, wait, what?
That’s one of the issues a state House property tax panel is looking at this fall, and near the end of a recent meeting, the chairman of the committee called on a veteran Capitol lobbyist to pitch a proposal to change the way property taxes work.
Wouldn’t it be fairer, asked Les Schneider — a veteran lobbyist, who over the years has represented textile manufacturers, video gaming businesses and the limousine industry — if Georgians were taxed on what they paid for a house or other piece of property, rather than what a county assessor says it’s worth?
“It’s hard to argue with the market, it’s hard to argue with the price,” Schneider told a House Ways and Means property tax committee. “If they buy it for $100,000, they’d pay taxes on that.”
For as long as the homeowner, or businessperson, owns the property. It could be a year, it could be 50. No more letters from the county telling you that the assessed value of your property — which is used to figure out what you owe in taxes — has gone up. If you paid $200,000 for your house, that’s what it would be worth for tax purposes for as long as you own it.
“I think it’s very intriguing and a real simplification of the valuation process,” said Rep. Dale Washburn, R-Macon, a Realtor and chairman of the panel “The fair market value argument is very sound. It’s an interesting idea.”
But while some real estate agents and lobbyists might like the idea, local government officials find it problematic. There are limits, for instance, on the tax rates most school districts can assess; one homeowner/business owner could be paying far higher taxes than another based on when they bought the property; some rural counties have little turnover in property, so could local schools and governments raise enough money to get by as the cost of services rise in a stagnant market?
“It’s just a shifting of the tax burden around from people and businesses that have been there to newcomers,” said Clint Mueller, a longtime lobbyist for the Association County Commissioners of Georgia, who added that similar laws have been referred to as a “welcome, stranger!” tax.
As long as Georgians have been charged property taxes to pay for schools, public safety, roads and other services, lawmakers have heard complaints about them. In general, under the current system, assessors set a value for a piece of property and a percentage of the value is taxed at millage rates set by local school boards, city councils and county commissions to pay for services.
Exemptions, such as a homestead exemption, reduce the taxable value of a property.
In some hot markets in metro Atlanta, assessed values can go up 20%, 30% or more at a time, increasing what residents have to pay in taxes based often on the value of other neighborhood homes and what they’re selling for.
Democratic Gov. Roy Barnes in the late 1990s passed a “homeowners bill of rights” and a tax credit on property tax bills. When Republicans took over the General Assembly, then-Speaker Glenn Richardson crusaded against rising property taxes — and Republican lawmakers floated the idea of replacing property taxes with higher sales taxes to pay for schools.
A swap from property taxes to sales taxes was first floated in Georgia in the 1990s, but the idea was criticized as bad for low-income families — who pay a higher percentage of what they earn in sales taxes — and potentially damaging to school systems. Sales tax collections are also seen as especially sensitive to downturns in the economy.
Macon-Bibb County Mayor Lester Miller told the committee Wednesday that adding a penny to the sales tax has allowed his county to reduce property tax rates 45%.
Schneider proposed reviving legislation filed in 2020 by then-House Ways and Means Chairman Brett Harrell, who is now a lobbyist. It would ask voters to pass a constitutional amendment allowing local governments to essentially set property assessments at what an owner paid for property. If the property owner makes substantial improvements, they would be tacked onto the value.
The measure didn’t go anywhere that session, which was interrupted by the COVID-19 pandemic. But Schneider, and some lawmakers, would like to see the idea reconsidered.
School districts would likely have the most concerns about any change in the system because they claim the largest portion of tax bills to educate children.
“It would be a problem in areas where there is little turnover in property,” said Angela Palm of the Georgia School Boards Association. Think of parts of rural Georgia.
School districts generally have a cap on their tax rate at 20 mills, although a few systems have higher rates. So if property digests are more or less frozen, many districts might quickly run up against that cap.
“You’re probably freezing 95% of their (tax) digest,” Mueller said. “That would kill school districts.”
In metro areas with frequent turnover, that wouldn’t necessarily be an issue, supporters say. The tax base would likely grow because of higher home/business sale prices.
And lawmakers said the change would force governing bodies to be honest: If they weren’t bringing in enough money to run schools, cities or counties, they’d have to ask for a hike in the tax rate, rather than increasing the assessed value of property to make up the difference.
“They are not going to lose money, they are going to set the millage rate to get the money they need,” said Rep. Clint Crowe, R-Jackson, a member of the committee and a Realtor. “This would add transparency in that it would be … ‘your taxes are changing because we decided to change the millage rate because we needed to have this much money coming in.’ ”
However, Rep. Chuck Martin, R-Alpharetta, a member of the committee and a former mayor, said it’s unlikely the proposal would pass the General Assembly without building in the possibility of an inflationary increase in property assessments.
Crowe added that there would be “unintended consequences” to freezing property assessments for tax purposes at what someone originally paid for their home or business, particularly in areas with high turnover. Somebody in Decatur who owned a home for 20 years, for instance, would inevitably be paying far less in property taxes than a neighbor who bought the house next door last year.
“Over time, you’re going to have a wider disparity between who is paying more for taxes and who is paying less,” he said.
Columbus-Muscogee County began freezing property values for assessment purposes in 1983, and Suzanne Widenhouse, the chief appraiser there, said tens of thousands of homeowners today pay less than $100 a year in property taxes.
That means newer homeowners and businesses play an outsized role in funding services. She showed the committee an example of two neighbors, one whose property value had long been frozen and paid $7.79 in property taxes, and another who paid $3,236 because they had more recently bought their home.
“Any time you talk about capping values, you create inequality,” she said.
Because so many homeowners have had their home values frozen for decades, the county has one of the highest property tax rates in the state, and it has seen its sales tax rate more than double. Those high rates, she said, have slowed the pace of economic growth and made it more difficult to attract businesses.
But the freeze is highly popular with longtime homeowners, who have paid little in property taxes for years, so efforts to change the system have been voted down.
“Once it’s in place, it’s impossible to remove, " she said.
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