How to fix Georgia’s property taxes

AJC Photo / Bita Honarvar

AJC Photo / Bita Honarvar

Let’s say you and your neighbor both buy your homes the same year, for about the same price. After a few years he moves — and sells his house for $100,000 more than he paid.

Good for him! But when your property tax bill comes the next year, your own home is suddenly deemed more valuable, too. You don’t have any more money in your pocket, and you aren’t getting better schools or more street light. All that’s changed is your tax bill.

The unpredictable nature of property taxes makes them a particularly loathed levy. As I explained in greater detail Thursday, they even defy the laws of economics. Can’t we do better?

I think we can.

Government property appraisals are an elaborate way of recreating what the market does on its own, to establish a tax base for properties that haven’t changed hands. This is a bad way of meeting a worthy goal.

While some people might want their home assessments frozen at the sales price, over time that means people who stay in one house pay a lot less than neighbors who just moved in. That’s no more equitable or realistic than the current system, and it creates a perverse incentive for people not to sell their homes — shrinking supply, driving up prices and further distorting what new buyers pay for their homes and their taxes.

Rather than (badly) mimicking the market, with wild gyrations in many places, let’s put tax assessments on a steady, low, predictable path.

Here’s what I have in mind: When you buy your home, the county accepts your sale price as its starting value. From then on, until the home sells again or you pull a building permit for a major renovation, the assessment increases each year by a set percentage.

Actuarial studies would be necessary if this idea were to go forward, but for argument’s sake I’ll open the bidding at 2.4 percent. It isn’t a round number, but it would mean the value doubled over the course of a 30-year mortgage, which feels about right. And it more or less tracks the long-term average of general inflation. If your bill is $1,000 this year, it’d be $1,024 next year.

Yes, that means a small automatic tax increase each year, even in years when the market actually falls. But let’s face it: Your assessment tends to rise over time already. This allows it to do so in a way that is steady and predictable. The day you closed on your house, you would know not only what your mortgage payment would be, but a good idea of your property tax bill each year, too.

And yes, local governments and school boards could still raise the millage rate to increase your taxes. But they’d no longer get a stealthy revenue boost when the tax digest shoots upward. They could also lower the millage rate to keep revenues flat. Either choice would be an improvement in transparency, which just might impose some more fiscal discipline on them.

I bounced this idea off a former local elected official who suggested a periodic checkup, maybe every 10 years, to ensure properties that hadn’t sold stayed in line with those that had. I could live with that.

But like a lot of you, I’m tired of living with shocking property tax assessments produced by staffs of appraisers recreating the market’s work. A lone person who’s good with spreadsheets and mail merges could just about run this system himself.

Sounds about right to me.

Reader Comments 0

48 comments
Eustis
Eustis

Try the Conservation Use Program. My maid pays $78/yr. on her $14,000 property while my neighbor pays $78/yr. on his $84,000 property.


Fair?

Tcope
Tcope

Here is my weird story about property taxes. 7 years ago I moved from Gwinnett County to Fulton. My house in Gwinnett was almost the exact same square footage and land size as my home in Fulton. My new house is 16 miles from the old house. My property taxes went from $3500 per year to $10500 per year.  Same house size same lot size and triple the property tax.

WillieCoyote
WillieCoyote

It would also be nice if the government couldn't take ownership of your home for non-payment only to auction it off for the taxes owed.  It makes no sense to never truly own your home.  I get that counties need a revenue stream but other punitive actions should be explored.


Why not assess a "sales tax" when the home is purchased that can be paid outright or in installments over a period of time.  Other annual (much smaller) county taxes can be levied on an annual basis that are based on property value as described in the article.

MoreySims
MoreySims

property taxes are way too low! all these rich people owning property should pay a lot more money to reduce this obscene wealth inequality ---- low income people need more money --- the govt benefits they get are chump change. i'm tired of this.

Ficklefan
Ficklefan

Nice try, Kyle. But, it fly because it will not feed the government  beast with its voracious appetite for more and more revenue, to go along with more and more growth and more and more control over all aspects of American life. Do you really think there is any interest in the State House for eliminating the stealth revenue boosts? They love those boosts. 


Do you really think there is any support for changing a property tax system that allows tax assessors to become comatose when values are dropping like rocks, dragging around at the speed of molasses when it there is no justification whatsoever for all of the over valued real estate in their jurisdictions  - based on their own standards?  But then,  springing immediately to life, full of action and energy and  vim and vinegar, to quickly ensure sure that their assessments take into account even the slightest increase in values when things  get better. 


The people may hate it, but it works very much to their advantage. Hold the line at all costs in when values plummet, and then make 'em pay, and make 'em pay through nose. Over the long haul, there may be a dip or two, but over all, the property tax collections go no where but up and up. Why would any government at any level change such a system? 


I appreciate the thought that went into it. But look at who benefits from the systematic lack of fairness in the property tax. Not much thought necessary. This way, we get more and can always plan on getting more. That way we get less.  That is about all the "thought" your plan is going to get. 


Kyle_Wingfield
Kyle_Wingfield moderator

@MarkVV Had you read beyond that line of his you quoted, you would have seen he was making a point about "fair market value" being enforced with a lot more enthusiasm when the market is rising than when it falls. Which is a very valid point, as recent experience demonstrates.

MarkVV
MarkVV

@Kyle_Wingfield @MarkVV 

That is a valid point, but it was still cloaked in the overall message of “the government beast” and “control over all aspects of American life.

Kyle_Wingfield
Kyle_Wingfield moderator

@Ficklefan Actually, the state property tax is going away after this year. It will be exclusively a local tax beginning in 2016.

MarkVV
MarkVV

@Ficklefan 

This kind of rant against the government is as silly as it is mindless. The property tax is one of the sources of revenue; I do not think that anybody denies that. (In this case, as Kyle has just pointed out, it will be local government revenue.) It is one thing to criticize specific government programs you disagree with, but ranting about “more and more control over all aspects of American life” by the government is meaningless. Do you want to live without government?

ganymeade
ganymeade

@MarkVV @Ficklefan I am fearful we all know the answer to your last question. Sad as it is, there are people that actually believe that.

MHSmith
MHSmith

@Kyle_Wingfield @MarkVV  Yeah, the county manger usually invite reporters from local papers to discuss and publish a article informing the readership how the residents of his county ad-mo-tax-gha  property values were actually worth more than you think. 

This really happened in my county several years ago, Kyle.


Now want to talk about cloaked messages?  LOL 


Oh and I read Hillary said she is going to raise taxes and grow the GUB'MENT control  over Wall Street. 

Bet the Street isn't giving her enough campaign money Kyle: What do you think?



LogicalDude
LogicalDude

I filled out paperwork for the homestead exemption.  I was told it meant that my taxes would remain the same whether or not prices fluctuated around me.  If it doesn't do that, then what was it supposed to do for me? 

MarkVV
MarkVV

The property tax assessment should indeed be based on value of the property, and the only known and realistic kind of such a value is “the fair market value” of the property. However, if there is anybody who can invent a practical, fair and defensible method to determine the fair market value, let’s give him/her the keys to the city or Nobel prize.

Thus, what we have is the “sales price,” with all its problems. On one hand, we have the selfish attitude of a “not recent purchaser,” who feels unfairness if his assessment is raised sharply because another house in the neighborhood is sold and bought for a much higher price. On the other hand there is the argument of a recent home buyer that he/she should not pay higher tax than somebody else is paying for the same house (same in the sense of tax-value related features).

There is some merit in Kyle’s suggestion of an assessment increasing each year by a set percentage from the sale price, unless the house is sold or renovated. There is, of course, a hole of the size of Grand Canyon in his proposal. What “sales price?” If you bought your house 30 years ago, you would want to claim that as starting point now? And as I have pointed out above, that proposal creates unfairness for people buying a similar house for a higher price (than somebody else recently) and thus would be paying more tax for the property with “no additional benefits.”

Kyle has reported (not suggested) a suggestion for a periodic checkup, maybe every 10 years, to ensure properties that hadn’t sold stayed in line with those that had, and “he could live with that.” In that case, I believe that such a “checkup” of all the assessments should be the starting point and they should be ”frozen” during that period of time (except for the periodic increase by a set percentage and cases like renovation or other substantial property improvements), regardless of sales.

There is, of course, another big catch. That “periodic checkup” really means another “value” or “fair market price determination,” and we are back to those difficulties of making a fair one.

Dearie
Dearie

Great column and worthy solution. 

Mark VV ~ part of being a home owner is fiscally planning so you can have some control over your household budget.  Kyle's plan would give both home owners that ability.  Having the city put an arbitrary, yearly value to your home does not allow you to plan with any certainty.  Why should House #2 have their budgeting be affected by the actions of their neighbor.  If House #1 sold for a lose at $150,000 would House #2 have their taxes reduced?  It would only be fair for it to go both ways.

I like to be responsible and Kyle's plan let's me be.

LilBarryBailout
LilBarryBailout

If you don't like the millage rate, that's an issue you have with your elected representatives.  The amount of tax you pay is completely up to them.  Assessments merely determine each homeowner's share of the government's take.

JackClemens
JackClemens

Yes. I agree with your proposal. It makes a lot of sense. Because of that, I'm skeptical of it ever being implemented.

Shar1
Shar1

I live in Fulton/City of Atlanta.  I had an appraiser out to my hopsme less than two years ago, and my appraisal was negotiated and agreed upon.  It went up a reasonable percentage the following year, but jumped 47% this year (with no improvements made) while the market in my neighborhood only rose 6%.


City of Atlanta is at the top of its millage rate - which is the highest in the state - and the only way to get more money is by rigging the appraisals.  However, just making stuff up is not a fair basis for taxation.


Perhaps home values should follow market increases/decreases by zip code, with exceptions for sales and renovations.  The appraiser's office should have to explain and defend anything that exceeds these guidelines by +/- 10%.

MHSmith
MHSmith

It would be hard to think of a more ridiculous method of assessing home values than we have in place now. Having or using an independent professional house appraiser or home appraisal company or ask real estate brokers to volunteer their appraisals for all the zip-codes. I like what you said Kyle, like everyone I'm open to take a look at any serious proposals to meet the need without going to the absurd.    


Obviously we would all like to  have the absurd - no taxes period!    

CDW2000
CDW2000

That is actually similar to how things work in at least parts of FL.  Annual increases are capped (last I checked at 5%) per year, and when the property sells the value is reset to the sales price.  No wild peaks and valleys on the assessments, no 300% increases year over year.  And it would likely increase efficiency in the tax assessor's office because now you don't get flooded with assessment challenges every year from people facing huge swings.


Predictable, transparent, efficient.  Three things one doesn't generally associate with government.

JohnnyReb
JohnnyReb

Rising home value is a good thing.  Unfortunately, higher taxes come with it.

What really sucks is the appraisal that values a home at much less than it can be built for today all due to the Feds stupid social engineering that produced the housing bust.

Throw in a transitioning neighborhood, which comes with devalued properties and an owner can literally lose hundreds of thousands of dollars.

This is much worse than rising property taxes.

Visual_Cortex
Visual_Cortex

Not a fan at all of relying so much on property taxes as we do, but as for an equitable assessment approach, we could do worse than what Kyle's proposed. Good luck getting any Georgian to acknowledge the need for regular tax hikes, though.

LilBarryBailout
LilBarryBailout

@Visual_Cortex

We don't need tax hikes.  We need more people paying taxes.  That would require economic growth, and Obama's anemic economy isn't producing it.

Area Man
Area Man

@Visual_Cortex 

Property taxes are like gas taxes in that the government has you by the jimmies and they know it.

notagain
notagain

The best way to get a fair assessment and to keep it.Is pass a law that the county must buy your property at the assessed value,if you are unhappy with the assessed value.

Kyle_Wingfield
Kyle_Wingfield moderator

@notagain How many people who simply needed to sell their houses would tell the county to take it so they didn't have to bother listing it? Also, note that "the county" is "the taxpayers."

zekeI
zekeI

Here is how you fix it!

1) - Eliminate ALL property taxes

2) - Create, Constitutionally, a flat level sales tax, consumption tax on ONLY ALL new goods and services, not

               a value added(VAT) tax!

 3) - Constitutionally mandate ALL governments must balance budgets based on that tax with No DEFICIT

                   SPENDING, NO DEBT! Yes that will mean at times spending on services and gimmes, must

                   be reduced, but, YOU CANNOT CONTINUE YEAR AFTER YEAR TO ETERNITY  INCREASING

                   SPENDING ON FEEL GOOD SOCIAL AGENDA PROGRAMS!

 4) - CONSTITUTIONALLY ELIMINATE THE INCOME AND PROPERTY TAXES!

Visual_Cortex
Visual_Cortex

Sounds brilliant. So tell me, where on the planet is this tax revenue scheme working its magic so I can learn more?

MHSmith
MHSmith

@zekeI As much as I like forcing governments to balance budgets I cannot support  #3  for the Federal Government without  stipulations to allow deficit spending in cases of "war and natural disasters".  


Otherwise I'm all in for reining in Federal taxing and spending powers, even though it will never happen during my lifetime. Although we came extremely close to a passing constitutional balanced budget amendment , it fail short by only one vote. 

postcub
postcub

MarkVV..

I think Kyle was suggesting that every 10 years where would be a "checkup" to make sure all homes would be appraised correctly.

I just hate having sticker when my home taxes come in.  If I know that in 2020 or 2030 or 2040, my home value could jump, I have time to plan for it.  Nothing is worse than having your finances in order only to find out you have to pay a huge tax bill out of the blue.  It seems the tax assessor assesses my home anytime the wind blows.

Kyle_Wingfield
Kyle_Wingfield moderator

@MarkVV I don't see a reply from you. Apologies ... please try again (and paste a copy in Word or elsewhere in case the glitch continues).

MarkVV
MarkVV

@postcub  See my answer to Kyle below - if it ever appears. There seems to be another glitch in force.

MHSmith
MHSmith

@Kyle_Wingfield @MarkVV


Paste a copy in whatever word processor you use, highlight it and set the  document to default format then copy and paste to the blog. When copying some things directly from the Web - depending on what browser used - copy as usual then  "Paste as plain text" in the blog text box area and post comment.


Don't know  if this helps anyone else but it works for me most of the time.



TicTacs
TicTacs

Sorry,  I don't like your idea any better.  When the digest goes up, mandate millage rollbacks to offset, and make the politicians vote for more money and then you can decide if you want to let them spend it at the ballot box.


What gets me is the favoritism different properties get based on all kind of reasons, who you know ... etc.  Many comparable homes have great differences due to all kind of excuses.


1st thing I'd do is ONLY let property taxes be levied to run the county, city,fire, and cops. 


Schools should get their money from the state ONLY,  PERIOD.

Ralph-43
Ralph-43

Kyle - Sounds like your proposal is a slight alteration of the California Jarvis-Gann bill passed back in the seventies.  A good assignment would be to review both that bill (Proposition 13) which was passed and, I believe, still in effect.  There is now significant time to view the effects of that bill on California's economy, public education (the primary hit), and the other state tax supported services.  Would make a good article and educational for all of us.

An American Patriot
An American Patriot

Yeah, sounds like a great idea; however, you haven't taken into account the propensity of the City/County Governments to raise the MILLAGE RATE.  You know, I don't think you'll ever get any county/city to go along with this because they like a lot of money coming in and with your plan, they always KNOW what's coming in and they ALWAYS, ALWAYS want more, more to spend so it'll look like they're actually doing something.  In addition, the SCHOOL BOARDS absolutely will not care for your proposal because they'll never have enough money to build new facilities every few years to try to show everyone what a great job they're doing.  


BOTTOM LINE - KYLE, WON'T WORK, SORRY.

MarkVV
MarkVV

I agree that the current system is arbitrary and unfair, but Kyle’s proposal appears to suffer the same problem of a lack of fairness; it just shifts it to another party.

According to Kyle’s proposal the assessment, based on the sale price, would increase by a set percentage each year ”until the home sells again” or there is a major renovation.

So let’s consider a hypothetical case. Two houses next to each other, built and sold the same year, with the cost related items just about identical, would sell for the same amount, let’s say $200,000.Using a hypothetical but practical assessment factors and millage, let’s say the first-year tax for each owner would be $2,850. The fifth year, assuming constant millage, the tax would increase to $3,134. So far so good.

But let’s say that then one of the houses was sold, and because of house shortage, popularity of the neighborhood or other factors, the house now would be sold for $300,000. (To counter a possible argument of wealth difference, let’s say that both owners have the same income; the new owners just had to take a much larger mortgage to afford the house.) Now the next year tax would be based on the sale price and it would be $4,275 vs. $3, 209 for the other, identical house. The owners of the unsold house would be happy, of course, with this new tax plan, but how fair would it be for the new owners, to pay a thousand more than people next door with identical house?

MarkVV
MarkVV

@Kyle_Wingfield @MarkVV 

Kyle, you just repeat the argument of unfairness to the first owner, if the tax is adjusted because of the sale of the other house. I agree, but again, the unfairness is just moved to the second owner, who pays more for identical house. In your sentence “the first homeowner simply pays more tax even though he derives no additional benefit,” all, it needs is to change the word “first” to “second.” What “additional benefit” does he derives? The possibility that the assessment will be adjusted after, say, 10 years does not change that.

Kyle_Wingfield
Kyle_Wingfield moderator

@MarkVV The difference is that the second homeowner chose to buy the house at that price. And he, in turn, gets some certainty in case a third person buys into the neighborhood at a higher price.

In my scenario, at least the buyer knows what he is getting when he buys. In the current system, one can devote 25% or more of one's monthly mortgage payment to taxes (via escrow) and still be subject to double-digit tax increases each year.

MarkVV
MarkVV

@Kyle_Wingfield @MarkVV 

If a tax is a “tax on property,” it should be based on the value of the property. What difference does it make “that the second homeowner chose to buy the house at that price?” As you have argued, there is no “additional benefit,” so why should two homeowners be taxed differently for the same property?

Kyle_Wingfield
Kyle_Wingfield moderator

@MarkVV Because, as I explained in my previous column, the notion that a sale of a dozen homes tells us something real about the market value of 1,000 more is deeply flawed at best.
In our hypotheticals, the homes are the same. This is almost certainly not the case in the real world. Appraisers try to adjust values based on varied features (a screen porch, new appliances, etc.) but we very quickly run into a small-sample problem. The appraisers acknowledge geography is very important. Does it not follow that the adjustments made for these other features should not also vary by location? There are simply too few sales to demonstrate the real value of a given home. I disagree with the very notion that a "fair market value" has actually been established.

MarkVV
MarkVV

@Kyle_Wingfield @MarkVV 

Kyle. You are not really addressing the problem I have raised. It makes no difference whether the houses are not exactly same “in the real world.” It is the principle that matters. You cannot argue that because the two houses have different screen porches, for instance, and it justifies a large difference in the tax.

As I wrote before, I agree that the system now is arbitrary and unfair. I think the idea of yearly regular assessment increases by a set percentage has merit, but it would have to be combined with freezing the base value for the set interval, say 10 years, regardless of a sale at higher price. Basically, people would “buy the tax” together with the house, even if the sale price changed.

Kyle_Wingfield
Kyle_Wingfield moderator

@MarkVV I would say my proposal is still more fair, and here's why.

The current system is designed to avoid the situation you describe. The result, however, is that the first homeowner simply pays more tax even though he derives no additional benefit. What's more, he made the decision to buy the house -- and his financial arrangements -- as if the price were $200,000, not $300,000. What if he can't afford the taxes at $300,000? He's out of a house that he could afford to buy, because the county says he should also be able to afford it at the higher price. That's absurd. The fact that his neighbor was able to afford a similar house at a much higher price shouldn't affect him.

Worse, what happens when the market comes back down? Does he get reimbursed for what now appears to be extra tax paid? Of course not. This is like being taxed on a stock before it's sold. 

There is something to be said for fairness across the tax digest, and that's why I could live with the periodic lookback. (It doesn't have to be 10 years; it could be five years, or the average number of years between sales in that county, or something else.) But we have been prioritizing that too long at the expense of fairness to individual taxpayers, and the system needs to be brought back into balance.