When ad valorem (property) taxes are used to fund government services, equally-situated property owners should be treated equally. Because residential ad valorem exemptions cause equally-situated property owners to be taxed differently they are, on their face, unconstitutional.

But nobody complains because they shift the cost of government from residential to the COMMERCIAL property owners. However, it is mathematically provable that residential development costs more to service than does commercial development; it makes no sense, therefore, that commercial property owners should pay a bigger share. "Just because they can" is not good enough; in fact, that starts sounding a lot like Karl Marx' "from each according to his ability..."

It is easier to prove that the "floating" exemptions or tax "freezes" like Columbus' law are unconstitutional because they mathematically shift the burden from one homeowner to ANOTHER equally-situated homeowner. In other words, you and your next-door neighbor could live in homes that are identical in every way, but you would pay less in property taxes than he simply because you had lived in your home longer.

What most people do not understand is that, under this type of exemption, people in lower-valued homes will over time pay a higher percentage of their actual tax bill than will somebody in a high-dollar house. Here's an example using fast-growing Gwinnett, but this would be true for any jurisdiction with a value offset exemption:

Two homes-- a $100,000 home in an older part of the county, a working class neighborhood much like a subdivision in the western part of Gwinnett, closer to Atlanta... the other a $500,000 home in fast-growing eastern Gwinnett. Both are eligible for the "value offset" exemption, meaning that the exemption is increased by the same amount as the increase in the assessed value so long as the eligible owner stays in the home.

Our smaller home in the older area appreciates at a steady 2% a year; it's not in a high demand area... after all, eastern Gwinnett is where people want to live, not Norcross or Lilburn.

The $500,000 home appreciates at a 12% clip every year-- it's right in the middle of one of the fastest growing areas in the nation.

After three years, the smaller home is now assessed at $106,120, a 6.12% increase in value. However, the owner is still paying based on the $100,000 value. The law requires that every property be taxed at 40% of its Fair Market Value; however, the owner of the smaller home is getting a little break-- he's only paying on 37.7% of FMV.

The owner of the home in the more desirable area is fairing much better. After three years, his home is now valued at $702,464. He, too, is still paying at the $500,000 FMV level, however. If you do the math, you find that he is only paying taxes on 28.47% of his property's Fair Market Value.

That is a huge, and very unconstitutional disparity between how the government treats the smaller home and how it treats the larger home for tax purposes. I am not a "bleeding heart" liberal, but this is a perfect example of a deficient law that helps the rich get richer while the less-affluent suffer.

Even if you don't accept my rates of appreciation, the general principle is time-tested and provable. Over time, it only gets worse.

You might argue that the owner of the lower-value home is paying fewer actual dollars than the owner of the higher-value property. That's true, but for the argument to hold water you must compare the actual dollars in proportion to the owner's ability to pay-- income, earning capacity, etc. I can guarantee, generally speaking, that the owner of the lower-value home earns less money than does the high-dollar property owner. Moreover, the higher-value house has more equity built in.

In other words, the owner of the lower-value home receives less benefit from the value offset exemption and therefore pays taxes on a higher percentage of his FMV, compared to other property owners.

In Gwinnett, the folks buying homes in the eastern part of the county are, in large part, new to the county. The value offset exemption was touted as a way to encourage long-term home ownership and benefit the folks who have been here the longest. However, the "math" proves exactly the opposite. The value offset and other similar exemptions will slowly shift the overall tax burden to homes in older parts of the county.

Now, consider the value "freeze" in light of the entire digest. As value is taken from the tax digest via the exemption and the digest becomes more and more static (less growth), millage rates will have to increase to fund the ever-increasing cost of government. As this county ages, growth moves to another area and Gwinnett's population becomes more settled, this process will accelerate.

The value offset exemptions are touted as a way to protect property owners from increasing tax bills resulting from higher assessments. Because politicians don't fully understand the millage computation process (and because taxing authorities aren't required to understand), they don't realize that slowing in the growth of the digest can only result in higher tax rates-- "that which they fear shall come upon them."

The only truly effective and fair solution is to "do the math." That way, the taxes you pay are directly tied to the cost of government. As property values increase, the millage rate must decrease as long as the politicians hold the line on the cost of government.

A MATHEMATICALLY-DERIVED MILLAGE RATE IS ITS OWN "VALUE OFFSET EXEMPTION."

I repeat: computed correctly... as property values (the tax digest) increase, the millage rate (and thereby the tax you pay) goes DOWN.

When you "do the math," slower-appreciating homes actually benefit from high demand and faster growth in another area. As the growth boosts the tax digest, a mathematical millage passes the benefit to the property owners in the form of a lower millage. Owners of homes that appreciate at a slower pace, percentage-wise, than does the relationship between the net tax digest and the cost of government change will actually receive a tax cut while the faster-appreciating homes may experience a tax increase.

Value offset exemptions ELIMINATE this potential tax cut for the owners of older, smaller, slower-appreciating homes.
 

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