InsiderAdvantage On Lindsey’s Assessment Freeze
Insider Advantage editor Dick Pettys reports on a sub-committee hearing on Rep. Edward Lindsey’s proposal to freeze assessments:
The 2009 tax relief measure – HR 1 – is a proposed constitutional amendment requiring voter approval in 2010 that would limit reassessments for property tax purposes to 3 percent per year, or the inflation rate, whichever is smaller. It would apply to all classes of property – residential, commercial and industrial. And in those cases where property only is reassessed every three years, as required by state law, the impact would be cumulative, meaning that those assessments could increase by 9 percent.
Following is a portion of my email to Pettys on Lindsey’s proposal:
I am a former Chairman of a county Board of Equalization and have studied the property tax system for over 15 years. Being a hard-working small business man, however, I could not make it to the sub-committee hearing on the tax assessment freeze. Had I attended I could have proved, mathematically, the following:
1. An assessment ‘freeze,’ like any depression of the tax digest, pressures taxing authorities to increase the millage rate to cover costs. Lindsey’s proposal will, over time, completely eliminate tax cuts. Never again will a taxpayer’s bill decrease.
2. Lindsey’s proposal not only doesn’t eliminate inequities but INTRODUCES additional inequity and unfairness into the tax process. The owners of similar and equally-situated properties will pay taxes on different values, which is patently contrary to a foundational tenet of our tax system. Codifying inequity in the Constitution does not make it less inequitable, either.
3. Lindsey argues that a homeowner should not be taxed on “unrealized gain.” I can prove, mathematically, that Lindsey’s argument is false; that it DOES NOT MATTER on what value a property owner is taxed (40% of FMV, 100% of FMV, on “unrealized gain,” etc.) as long as all are taxed equitably. Let me show you how a home can be taxed at 100% of Fair Market Value or the current 40% and the tax bill doesn’t change a penny!
4. More specifically on the point of inequity, an assessment freeze will shift the tax burden OFF of upwardly-mobile owners of newer homes in faster-appreciating areas of the taxing jurisdiction and ONTO the owners of older, slower-appreciating homes in more stable areas… the type of home often owned by the lower-income earners, the elderly and others on fixed incomes. The inequity is the fact that, over time, the former pays taxes on a much lower percentage of Fair Market Value than does the latter.
5. The previous effort by politicians to eliminate “back door tax increases”– Roy Barnes’ “Taxpayers Bill of Rights” millage rollback– was not only destined to fail but has caused incredible harm to many cities and counties, as well as resulted in massive tax rate increases. I can explain why, and I can also show you why Lindsey’s proposal will do the same and worse.
6. There is an incredibly simple way to solve the problems that Lindsey wants to address– and do much more– without all of the harm that I describe above. The Legislature merely needs to codify the process for calculating the millage rate that has been taught by the State Department of Revenue for decades to county tax commissioners, assessors, appraisers and Board of Equalization members. In other words, if the Legislature would require cities and counties to simply “do the math,” great benefits would accrue to the taxpayer and Lindsey’s assessment freeze (with the associated constitutional amendment) would be unnecessary.
Dick, when I make the above claim to elected officials the usual response is, “It can’t be that easy.” In fact, it is just that easy. And my assessment isn’t subjective at all– I can prove it all with a spreadsheet and a little time!
I met with Lindsey two years ago regarding his proposal and my solution. His ears closed and the conversation ended when I began to show him how much harm an assessment freeze would cause. I have not been able to generate significant interest over the 12 years that I have advocated a mathematical millage rate. It just isn’t a “sexy” solution to a very real problem.
Several years ago, I analyzed the tax rates and budget requirements of cities, counties and school systems across the state. I concluded that fewer than 1 out of 10 taxing authorities adopted a correct millage rate each year; that most jurisdictions overtaxed (assessed a higher tax rate than was required to fund the budget). I proved that a mathematical millage rate would result in an immediate tax cut for a majority of Georgia property owners with no detriment to local governments’ budgets.
In 1998 my efforts resulted in a 34% tax cut– the first reduction in over 12 years– for property owners in Snellville. Three years ago, I helped the city of Clarkston avoid total depletion of its reserves and probable bankruptcy when I taught the City Council how to calculate the millage rate correctly.
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