"The Taxpayers Bill of Rights:" An Analysis

On March 2, 1999 the Senate passed a bipartisan substitute to Senate Bill 177, a bill proposed by Governor Roy Barnes and State Senator Steve Thompson and designed to protect property owners from hidden tax increases resulting from a practice currently employed by many Georgia cities and counties.

The bill was designed to prevent "back door tax increases" which occur, according to the Governor, when local governments maintain a level millage rate even though the existing tax digest grows.

The act addressed the Governor's concern about escalating assessments by requiring all local levying authorities to establish a "rolled back" millage rate which would take into consideration increases in property values due to reassessment. The "roll-back rate" would be the new millage that would be needed to maintain the previous year's tax revenues.

If elected city and county officials want to establish a millage rate that is higher than the "roll back rate," they will be required to actually advertise and vote for a "property tax increase" to maintain the previous year's millage rate. Tax digest increases resulting from new construction would be exempted from the calculation.

The law requires that levying authorities publish "Notices of Property Tax Increases" when the new millage rate exceeds the mandated roll-back rate. Thus, if local governments seek to maintain an existing millage the local government would be required to hold three hearings and publish a notice that discloses the "tax increase."

If elected officials failed to hold the mandated public hearings, the law required that their paychecks be withheld until they did.

At the time, the Georgia Municipal Association indirectly defended the arbitrary setting of the millage rate. The organization conceded that maintaining the same millage rate despite growth "is not a new phenomenon," but they say that the practice contributes to the "stability" of property taxes.

TBoR misses the point

The primary failure of "The Taxpayers Bill of Rights" is that it fails to promote honesty in the ad valorem tax process by requiring a true millage rate. It allows taxing authorities to continue to set an arbitrarily high rate (overtaxation) or a rate that is too low, producing a deficit (debt).  It failed to require levying authorities to set a rate that truly reflects their actual budgetary needs.

Second, it discourages some jurisdictions from correcting an error.  If, in the tax year prior to the 01/01/00 TBoR effective date a city had operated at a deficit  because of a wrong rate, it could not raise its millage rate to the mathematically correct one without having to advertise it as a tax increase. In other words, a city council or county commission could be penalized politically for doing the right thing.

Likewise, many jurisdictions dutifully roll back the millage rate when they should be holding the line or actually raising it. Afraid of having to explain an "Intent to Increase Taxes," many cities, counties and school boards pile deficit on top of deficit.

The only reasonable hope for a jurisdiction in this situation is that new construction (exempted by the TBoR) will increase to make up the deficit. A city council or county commission may be pressured to approve bad development solely to balance the books.

The "Muscogee Deception"

Even worse, it seems, is a situation in which taxing jurisdictions are using the "TBoR" as a scapegoat for their continued overtaxation.  In this scenario, the taxing jurisdiction maintains the same millage as the previous year (whether it is high or low), but blames the state for making it "falsely" advertise a "tax increase."

We call this situation the "Muscogee Deception," based on the public position of the Muscogee County School District. As it had done the previous 15 years, the Muscogee School Board set the millage rate in 2005 at 23.37 mills. The minutes of an April 2004 board meeting reports that a board member said that "it is not the school district that is raising the millage rate by 3%. He further stated that this is the result of the tax digest and the school district will benefit from someone else's actions."

In fact, there were Muscogee County residents who paid an unnecessarily higher tax in 2004, the exact situation that the "TBoR" sought to prevent. Moreover, had the School Board set a mathematically correct millage, the owner of a $150,000 home would have paid $88.68 less in property taxes for schools... and the budget would have still been fully funded.

The Muscogee Schools have continued the same deception for fiscal year 2005-2006. The announcement of the TBoR-required hearings at the school web site reads: "The Muscogee County School District is not increasing the millage rate, but the growth of the digest will produce an increase in revenue of approximately 3.25 percent. The Board of Education has requested the Administration to fund the fiscal year 2006 budget at the present millage rate of 23.37 mills. There has been no increase in the millage rate in fifteen years."

The "Taxpayer's Bill of Rights," while intended to protect taxpayers from "back door" tax increases due to rising tax digests, has instead discouraged Georgia cities and counties from collecting sufficient revenue to pay for important government services, as well as provide cover for continued overtaxation by others.

Next: The Solution