MillageRate.com

The following was published in the Douglas County Sentinel this morning. The author, Birney Montcalm, is an appraiser in the Douglas County Assessors’ Office.

As a property tax professional, Montcalm understands what the politicians have yet to be able to grasp– an assessment cap would be completely ineffective and harmful to the property tax system:

In Sunday’s Douglas County Sentinel (Feb 15), Senate Majority Leader Chip Rogers (R – Woodstock), wrote a lengthy article advocating the benefits of reassessment caps (Georgia Public Policy Foundation:  Assessment caps good).

Sen. Rogers says, with absolute certainty, that Georgia’s property tax system is “a broken relic of a bygone agrarian-based economy”.  This idea first came from Speaker Glenn Richardson, whose been trying mightily to convince voters the state can run local governments more effectively than our local county commissioners.

Sen. Rogers wants to limit reassessments.  Under his plan, folks living in older, less expensive, and slower-appreciating neighborhoods will be forced to subsidize some of the property taxes of higher-income folks whose bad judgment and lack of foresight has landed them in one of those awful high-end, faster-appreciating neighborhoods.  These folks want all the upside of property appreciation (more equity and return on investment), but none of the downside (higher assessments).

Legislators such as Sen. Rogers don’t want voters to know this:  The county and school system has to have “X” dollars to operate at an acceptable level.  This means that whenever one group of property owners gets a law passed relieving them from paying part of their taxes, the rest of us will have to pay more to make up the difference.  This is not a back-door tax increase; the budget must still be met, and raising the millage rate is the only way to replace revenue lost through tax breaks voted in for certain groups of property owners.

I believe voters wouldn’t be nearly as generous if they understood they were actually being asked to subsidize the taxes of a certain group of property owners.  And, what would voters think if they knew most of the property owners benefitting from passage of the amendment probably have far more “ability to pay” than the average working-class property owner?

Sen. Rogers says repeatedly that he wants “government accountability”, while failing to divulge full accountability himself.  He wants voters to believe his ideas will benefit all property owners.  This is simply not true.  There’ll be winners, and losers.  He also knows the losers, uninformed of the true consequences of their vote, will happily help pass his ideas into law.

The sole mission of any local board of assessors is to ensure the fair and equitable distribution of the cost of providing vital government services at a level demanded by citizens.  This mission is highly regulated by state law.  Over many decades, these laws have been fine-tuned by new legislation and court rulings.  After receipt of a reassessment notice, a property owner is free to come in or call to discuss their appraisal with a staff appraiser.  If still unsatisfied, an appeal to the board of assessors can be filed.  If still unsatisfied, an appeal to the Board of Equalization can be filed.  If still not satisfied, the property owner can file an appeal to Superior Court.  Yet, according to Sen. Rogers, a “government employee” can simply “force” a property owner to pay more taxes.

Sen. Rogers mentions two “major variables in the mathematical equation to determine a property owner’s tax liability”.  Actually, there are three variables.  He correctly lists assessed value and the tax (millage) rate, but curiously failed to mention the most important variable:  county operating expenses (budget).

The formula for calculating a tax bill is quite simple:  To get the millage rate, simply divide the total budget by the total amount of the assessments of all taxable property. Example:

~ Operating expenses of county and school system are estimated at $150,000,000 (budget)
~ Total of assessed (40%) value of all taxable property comes to $2,000,000,000 (tax digest)
~ Millage rate:  $150,000,000 divided by $2,000,000,000 = 0.075 (expressed as 7.5 mills per $1000)
~ Your property valuation (fair market value) = $250,000
~ Your 40% assessment = $100,000
~ Your tax bill (if no exemptions applicable) = $100,000 X 0.075 = $750

Sen. Rogers goes on about “unrealized gains” being taxed unfairly.  This doesn’t make any sense to me.  If he needed to move and had to put his property up for sale, it’s safe to argue he would want to get the highest price possible.  If he bought the property 20 years ago for, say, $100,000, and it’s now worth, say, $200,000 (less than 4% appreciation per year), he has realized a 200% gain, no matter whether he has sold it yet or not.  The gain is realized by the fact that proceeds from the sale of his property would give him the ability to buy another $200,000 property somewhere else, instead of having to settle for another property worth only $100,000.

The basic idea behind the property tax system is that we all have a “fair” share in the burden of providing vital services, and that our share of the burden be based on the market value of our property.  The market value of our property is usually determined by our level of income.  There are many of us who own property well within our ability to maintain, and can easily afford to pay our taxes.  Some of us have chosen to purchase property we cannot comfortably maintain, and are therefore quick to complain about taxes.  If we all pay our fair share, the burden can be a lot more bearable for us all.  But, if we artificially hold the value of faster-appreciating property below its actual fair market value by capping assessments, those of us with slower-appreciating property will soon be digging deeper to help pay the taxes of those more fortunate folks living in high-appreciating neighborhoods.

Birney A. Montcalm
Douglasville, GA 30135