Assessment Cap Offers No Accountability
The following was written in response to Senator Chip Rogers’ 2/13/09 article for the Georgia Public Policy Foundation, “Count on Tax Assessment Caps to Offer Property Owners Accountability:”
Senator Rogers is wrong when he writes that assessment caps are the best way to impose accountability on local officials.
First, there can be no real accountability resulting from an assessment cap because of the primary flaw in the tax law– a City Council, County Commission or School Board can currently adopt any millage rate that it chooses. There is no law that requires them to adopt a tax rate that has any connection to the cost of government. As a consequence, many adopt a tax rate that takes more from property owners than is required to fund government services. And the overtaxation happens even when the millage rate remains the same from year to year.
One paragraph from Rogers’ article belies his misunderstanding of the tax process and how true accountability can be achieved. He writes:
“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.”
In fact, there are THREE major variables in the mathematical equation to determine a property owner’s tax liability. TWO of those variables are under the control of local politicians, and therein lies the problem.
“Assessed Value” is determined by each county’s appraisal staff under the guidance of the Board of Assessors. “Assessed Value” is supposed to be a representation of “Fair Market Value” and is determined according to standard public appraisal standards, based on comparable sales for the most part which is a valid measurement of a property’s desirability and value. “Assessed Value” is determined according to established standards and is not even within the control of the local politicians upon whom Rogers seeks to impose accountability.
(In fact, there’s a good question for proponents of assessment caps to ask themselves– why would you think that an appropriate solution to the problem of “back door tax increases” and lack of accountability would be to artificially regulate a variable in the tax process over which local elected officials don’t even exercise any control?)
As I wrote above, there are TWO of the three variables that ARE within the control of the local pols. They are the millage rate and the one that Sen. Rogers overlooked– the budget, or “the cost of government.”
A quickie refresher…. the millage rate is SUPPOSED to be the budget line item representing the amount of revenue from property taxes required to balance the budget DIVIDED BY the Net Tax Digest. Multiply that number by 1,000 and you have the millage rate, which is the amount of tax, in dollars, on every thousand dollars of taxable value that is required to fund the requirements of the levying authority’s budget.
Sadly, there is no law requiring levying authorities to “do the math” described above which, incidentally is not my idea but the calculation that has been recommended and taught by the Department of Revenue for decades. As a consequence, elected officials can adopt any millage rate they choose (and their constituents will swallow), even if that means adopting the same rate as the previous year even when the Net Tax Digest increases (creating the infamous “back door tax increase”).
Even if HR-1 or HB-233 were to be enacted, levying authorities would STILL be able to adopt the previous year’s tax rate. With growth in the tax digest resulting from new construction, rezonings, change of ownership AND the 3% increase allowed by the cap, there will STILL be the potential for windfall tax revenue. An assessment cap doesn’t eliminate “back door tax increases” at all; it will merely limit their financial impact in any single tax year.
Further, there is NO meaningful pressure on politicians to control the cost of government! And isn’t THAT the accountability that we need? Can we agree that the cost of government is the primary driving factor in the entire process; for if there were no costs to pay there would be no reason for taxes at all?
Now, it would not be appropriate nor wise for the State Legislature to regulate how much money a local government can spend. However, with a small tweak to the tax code they could impose AUTOMATIC ACCOUNTABILITY on local officials… the type of accountability that forces them to address the real cause of rising tax bills, which is the cost of government.
Requiring levying authorities to simply “do the math” would remove a variable– the millage rate– from the control of local officials. No longer could they hide increases in the cost of government by maintaining an already inflated millage rate from year to year. No longer could they benefit from the windfall generated by rising assessments even when they don’t “raise taxes.”
The millage rate becomes nothing more than what it should have been all along– the answer to a simple math problem. By requiring a mathematical millage, only ONE variable would be left in the hands of the politicians… the cost of government.
If, then, a City Council wants to avoid a millage rate increase, it must hold any increase in the cost of government (at least, the portion to be funded by property tax dollars) below the rate of increase in the Net Tax Digest. If the Tax Digest increases, for example, by 3% and yet the revenue required from property taxes increases by 5%, the millage rate MUST increase simply as an OPERATION OF THE MATH.
You have INSTANT ACCOUNTABILITY…. the politicians must justify the higher tax rate to their constituents and the constituents will have the ability to approve or disapprove, either during the budget process or at the ballot box.
Conversely, if the cost of government is held in check or increases at a lower percentage rate than growth in the Tax Digest, a TAX CUT occurs simply as a result of the math! As assessed values rise, the millage rate goes down… as long as the politicians are ACCOUNTABLE to the people and control the cost of government!
In other words, the taxpayer actually receives a BENEFIT from growth in the Tax Digest in the form of a tax CUT! Rising values are now a good thing!
Further, a mathematical millage imposes no artificial or unreasonable restriction on the ability of local government to generate needed revenue. A mathematical millage produces NO MORE and NO LESS than is required (by the budget) to fully fund the cost of government. A mathematical millage imposes true accountability without hampering local government’s ability to raise funds.
An assessment cap, on the other hand, prevents local government from responding to the growth of their community. A growing tax base helps to fund the associated increased demand for government services. You can cap assessments, but you can’t stop the growth. A cap will prevent local governments from using the growth in the digest to fund added services… the only other place to go for significant revenue is the taxpayer in the form of a tax increase.
Even more “accountability”…. as I stated, with a mathematical millage the only variable left in the hands of the politicians is the budget. Suddenly, the required public hearings become more more meaningful. In order to be funded by the adopted millage rate, proposed expenditures MUST be in the budget! No longer could a city or county use the “back door tax increase” windfall to fund expenditures essentially “off the books.” In order to be part of the millage calculation and be funded, an expenditure MUST be included in the budget.
And MORE “accountability”… because the only way for a local government to give its constituents a “tax cut” would be to reduce the revenue required from property taxes in relation to the Net Tax Digest, politicians will be forced to become much more creative in identifying non-tax revenue sources. Suddenly, impact fees and user fees and local option sales taxes and the like look much more attractive.
Finally, a mathematical millage requirement would satisfy Republican ideals in a way that few laws have in recent years.
Transparency in taxation is promoted… the millage rate becomes a more accurate representation of the cost of government; the budget process becomes more meaningful in terms of its value to the taxpayer because there would be an actual MATHEMATICAL connection between what their government costs and what they pay.
The size of government would be reduced; if not in dollars and cents, at least in the size of the tax code. A mathematical millage eliminates, for example, the “Taxpayers’ Bill of Rights” millage rollback which was the first legislative attempt to eliminate the “back door tax increase.”
Likewise, there would be greater impetus (accountability) to REDUCE the cost of government rather than grow it. That’s how the politicians dole out the “tax cut,” remember?
You should contact your State Senator NOW and tell him to vote NO on HB-233 and/or HR-1. Direct him or her to www.millagerate.com and tell him/her that you want local governments to simply “do the math.”
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