MillageRate.com

The following was sent to various State Representatives. It is provided here to promote your understanding of the millage rate calculation process.

Subject: The answer to high tax bills

Representative,

In the past, the State Legislature has enacted or proposed a number of measures intended to address the impact of rising property assessments on the taxpayer’s annual bill. You are familiar with HR-58, which would significantly reduce property taxes by replacing the school portion with a state sales tax, but has its own set of problems. HR-162 would constitutionally limit increases in homestead property values. In the past, the state has enacted several laws, including Roy Barnes’ “Taxpayers’ Bill of Rights,” which were intended to address this same problem.

To date, every effort has been, in my opinion, misguided, ineffective and, in some cases, counter-productive. Actually, it’s not just my opinion– it is mathematically provable that they are doomed to failure. The solution, however, is actually very simple.

The state should require taxing authorities (cities, counties and school boards by recommendation) 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. To calculate the rate correctly, you divide the portion of the budget to be funded by property tax dollars by the net tax digest. The result (multiplied by 1,000) is 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 part of the state-mandated training for 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!

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.

I have researched the property tax processes of school systems from across the state. So far, my research has not found a single school board that has adopted a mathematically-correct millage rate. Most consistently OVERtax their constituents via an arbitrary and inflated rate.

Here are a few examples:

The Atlanta City School System’s 2005-2006 budget requires $526,781,768 in property tax dollars. However, the School Board adopted a millage rate (20.423) which will OVERtax the property owners of Atlanta by at least $18 million MORE. The owner of a $150,000 home will pay $58.11 more than what would be required with a mathematically correct millage rate (17.611).
( http://www.millagerate.com/schools/atlanta/ ).

The Clayton County School System adopted a rate of 18.916, the same rate as last year. The Clayton School System was required to advertise an “Intent to Increase Taxes” pursuant to the “Taxpayers Bill of Rights” law enacted in 2000. The School Board issued a press release claiming that it was not “raising taxes;” it was keeping the same rate as the previous year ( http://www.millagerate.com/blog/?p=21 ).

What the Board DIDN’T say was that the adopted millage was already 1.305 mills TOO HIGH. The adopted millage will OVERtax the property owners of Clayton County by at least $9.225 million ( http://www.millagerate.com/schools/clayton/ ).

The owner of an average Camden County home will pay approximately $70 more than necessary in school taxes this year because of the mathematically incorrect and inflated millage rate adopted by the Camden County School System. The Board adopted a tax rate of 14.578 when the mathematically correct rate was 13.409 ( http://millagerate.com/schools/camden/ ).

Pick any school system across the state– the odds are that it is OVERtaxing its property owners via an inflated millage rate.

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, sales tax for schools, the now challenged floating exemptions [ http://www.ajc.com/metro/content/metro/0705/24taxsuit.html ] and even Roy Barnes’ “Taxpayers’ Bill of Rights” tried but will fail to address:

Under existing law, when property values go up taxing authorities will 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 hope to address.

If they were simply required to “do the math,” however, increases in the tax digest would result in an AUTOMATIC benefit to the taxpayer in the form of a lower millage. Keep the math in mind….

The portion of the budget to be funded by tax dollars [A] divided by the Net Tax Digest [B] 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, simply as a process of the math.

(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.”)

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 everybody’s 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.

(Regarding the millage rollback and its fundamental flaw– while it may result in lower tax bills it does NOT guarantee that the rate is not STILL too high. The rollback does not guarantee a mathematically correct rate, nor does it always pass the full benefit of a growing tax digest to the taxpayer in the form of a lower millage. Besides, the rollback is NOT EVEN REQUIRED; a taxing authority can choose to overtax if it is willing to weather the public hearings. Many jurisdictions have found ingenious ways to justify their overtaxation to the public.)

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. In general, HONESTY is promoted in the property taxation process.

Last year, I began an effort to convince the State Legislature to enact a law requiring taxing authorities to adopt mathematically-correct millage rates. I have created a web site at which I publish the results of my research. At www.millagerate.com, I provide a simple description of the millage rate calculation and even a millage rate calculator where you can plug in the required information and figure out for yourself what your millage rates should be.

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 describe.

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.

You can view the draft bill at http://www.millagerate.com/law/bill.htm .

Thank you for persevering through this exceptionally long email. I would appreciate the opportunity to discuss this with you further. I also invite you to view these current examples of gross overtaxation via an arbitrarily-inflated millage rate:

Muscogee County Schools: http://www.millagerate.com/schools/muscogee/index.htm

City of Suwanee (Gwinnett): http://www.millagerate.com/gwinnett/suwanee/index.htm