Dear Representative,
In the past, you have introduced or co-sponsored a number of measures intended to address the impact of rising property assessments on the taxpayer’s annual bill. Through the years, the state has enacted several laws, including Roy Barnes’ “Taxpayers’ Bill of Rights,” which were intended to address this same problem. In the recent past, you have voted for an assessment cap or “freeze.”
To date, every effort has been, in my opinion, misguided, ineffective and, in some cases, counter-productive. The solution, however, is actually very simple. The state should require taxing authorities (cities, counties and school boards) to adopt a mathematically-correct millage rate.
There is only one way to mathematically calculate the millage rate, which as you know is the rate adopted by taxing authorities that is applied to the value of all taxable property within its jurisdiction to generate the dollars needed to fully fund the budget. You divide the portion of the budget to be funded by property tax dollars [A] by the net tax digest [B]. [A] divided by [B] equals [C], the millage rate.
This simple math has been taught for years by the Department of Revenue to county Tax Commissioners, assessors and appraisers, as well as Board of Equalization members, but it is NOT taught to newly-elected County Commissioners, City Council members and School Board members, the very folks who adopt the millage rate!
Also, I hope that you are surprised, if not alarmed, that there is currently no law that requires taxing authorities to adopt mathematically-correct millage rates. The law currently allows taxing authorities to set any tax rate they choose.
Consequently, taxing authorities often adopt arbitrary, politically-palatable rates that have absolutely no mathematical connection to their budget needs. In fact, my research indicates that more than 9 out of 10 Georgia taxing authorities adopt a mathematically incorrect rate each year. To date, I have only found two that have done it right– although one “backed” into the correct rate and the other may have gotten it right by sheer coincidence!
The result of this failure to “do the math” is that Georgia’s property owners often pay more than is necessary to fully fund the cost of their local government.
Here is why it is so important that elected officials be required to adopt a mathematically correct rate and why it is the only true solution to the problem that legislation limiting increases in property values, floating exemptions and even Roy Barnes’ “Taxpayers’ Bill of Rights” tried but will fail to address:
Under existing law, if property values go up taxing authorities collect more tax dollars than they need when they keep the same millage rate as the previous year. In other words, property owners are overtaxed; yet, their elected officials tell their constituents that they are not “raising taxes;” the higher tax bills are the result of rising assessments. It is the very problem that you have attempted to address.
It is known as the “back door tax increase.”
If local officials were simply required to “do the math,” however, increases in the tax digest would result in an automatic and systematic benefit to the taxpayer in the form of a lower millage. Keep the math in mind….
[A] the portion of the budget to be funded by tax dollars DIVIDED BY [B] the net tax digest EQUALS [C] the millage rate.
If [B] increases in this equation, [C] MUST decrease (as long as [A] doesn’t rise at the same pace as [B].
In other words, as long as governments hold the line on expenditures, when property values go up, the millage rate– and thereby individual tax bills– go down, but ONLY as long as the rate is mathematically “connected” to the budget and the tax digest.
(A mathematical millage is what it is and nothing more…. just the answer to a math problem. The “politics” of the millage rate are eliminated; all of the focus is then shifted to the budget process. If politicians want to “cut taxes,” they MUST hold increases in the cost of government BELOW the rate of increase in the tax digest. In other words, politicians would be required to EARN their “tax cut.” This may be the primary long-term benefit of my proposal.)
The above will not be true for every individual taxpayer, of course– some folks’ individual property value may go up at a greater rate than does the tax digest overall– we must assume (and, by law, should ensure) that every property is assessed at “fair market value” and that, as long as Georgia uses property taxes to fund the cost of government, everybody should pay equally based on the taxable value of their property.
Nonetheless, the ONLY way that the benefit of growth in the tax digest can be passed along to the taxpayer is to adopt a mathematically-correct millage rate. There are numerous other benefits, but this is the foundational aspect that does what floating exemptions, value increase limits and the “Taxpayers Bill of Rights” millage rollback fail to do.
The “bottom line” benefit of a mathematical millage is that the Georgia property owner pays no more and no less than is required to fully fund the cost of their local government. A mathematical millage forces elected officials to hold down the cost of government or, at the very least, identify additional non-tax revenue sources.
Legislative Counsel has drafted a bill for which I am seeking sponsors for next year’s legislative session. The bill would repeal the portion of the “Taxpayers’ Bill of Rights” pertaining to the millage rate rollback and insert a requirement that the millage rate be calculated according to the procedure that I described.
This simple legislation would correct a glaring deficiency in the law governing property taxation and result in IMMEDIATE tax cuts for hundreds of thousands of Georgia property owners.
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