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January 10, 2008
Over the last 15 years, tax rates have held steady or been reduced in almost every year. Yet homeowners are crying out for property tax relief.
While Georgia has experienced extremely good property appreciation, it has been a double-edged sword in that tax valuations naturally have risen too. While real estate appreciation is a good thing, the payoff is only at the sale of the property. Meanwhile, the taxes fall due every year.
In 2003, former Fulton County Chief Appraiser John Cunningham said the taxpayers are caught in a bind.
"During the last 10 years, property reassessments in Fulton County have increased by 122 percent. Such mammoth increases are the primary source of property tax increases," Cunningham said.
In April 2007, Georgia Speaker of the House Glenn Richardson introduced House Resolution 900, his plan to eliminate most property taxes and replace them with a new sales tax program that would raise the state sales tax to 4 percent and couple it with a 4 percent income tax.
However, replacing the $9 billion in property tax revenue that would go away under what was ambitiously called the Georgia Repeals Every Ad Valorem Tax (The GREAT Plan) was something unique in the 50 United States.
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'When Speaker Richardson talks about taxes, you're
playing his game. It's not about taxes, it is about who makes the decisions.'
Roswell Mayor
JERE WOOD |
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Richardson's plan immediately was met with skepticism if not downright hostility. He could never show how the plan was going to deliver the revenue he said it would. Then there were all sorts of new "transaction taxes" that would be added to the mix. Thus, if you went to the barber or the plumber came to you, there would be a business transaction tax.
The GREAT Plan also called for a great many more sales taxes through the elimination of "exemptions." For instance in manufacturing, the materials that go into the completed product are exempt from sales tax.
Critics note that if the Legislature did away with those sales tax exemptions, manufacturing in the state would die.
Local elected bodies were instantly suspicious of this plan as well. They noted that without property tax revenue, all budgets would be set by the Legislature because it collects the sales tax and would determine how those revenues would be returned to the local communities. Since all spending bills originate in the state House of Representatives, that would mean just about all spending would be controlled by the House and its speaker, Glenn Richardson, would hold sway over all.
Essentially, every city council, school board and county commission would become just a lobby group for its local constituents.
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Already lining up to oppose the plan are such diverse groups as the Association of County Commissions of Georgia, the North Fulton Bar Association and the Duluth City Council. All six North Fulton mayors under the aegis of the North Fulton Municipal Association have added their names to the opposing side.
Roswell Mayor Jere Wood said the speaker's plan is not about taxes or tax reform, it is about control and decision-making.
"I feel the way the North Fulton Bar does. It is opposed to any shift of decision-making from local control to the state. That's just a bad idea," Wood said. "We in Roswell have always supported the idea that the government that governs closest to the people governs best.
"When Speaker Richardson talks about taxes, you're playing his game. It's not about taxes, it is about who makes the decisions."
Other local elected officials are in near unanimity with Wood. Alpharetta Councilman David Belle Isle strongly opposed Richardson's proposal.
"This could be, if passed, I think the single most detrimental thing to local government, local control," Belle Isle said.
"The proposal comes right out of the Communist Manifesto, 'From each according to their ability, to each according to their need,'" he said.
Dollars raised from a geographic area such as Alpharetta should be spent where it was raised, he said.
"Whoever has the best senator, representative, lobbyist, that's where your dollars would be spent," Belle Isle said. "Not only should we say no, we should say hell no," he said.
Atlanta bond attorney Dan McRae, who is also the Public Policy Committee chairman for the Georgia Economic Developers Association, said what was being proposed was not tax reform, but instead a giant tax shift.
"The sales tax is one of the most regressive taxes you can impose. It puts an incredible burden on those least able to pay to make up a $9 billion shortfall left by property tax," said McRae.
Richardson makes no bones about the regressive sales tax. Speaking last November to a group of educators, he said he wants to see all Georgians, citizens or not to "pay their fair share."
It has been a hard sell for Richardson and his lieutenants who have been out on the Rotary Club and PTA circuit trying to perk up interest in his GREAT Plan. It has been hard on the GOP rank and file as well. They are meeting strong opposition from their local elected officials who see just about all of the revenue and thus all of the decision-making headed to Atlanta.
Even such conservatives as John S. Sherman, president of the Fulton County Taxpayers Association, who has fought for property tax reform and relief for years, hesitates to embrace Richardson's plan. He is particularly distressed that Richardson offers no feasibility study to show that his plan can raise enough money to cover the revenue lost by cutting off property taxes.
"How can the taxpayers consider such a drastic change without any specificity on projected annual revenues to cover city, county and school services?" Sherman wrote in his newsletter last month. "Is 4 percent income tax and 4 percent state sales tax sufficient? What happens in time of recession when income and sales taxes are significantly reduced? If a city, county or school district is in need of additional funding, it would be completely dependent on the State or would have to raise additional sales tax through a referendum."
Sherman went on to point out that local governments – schools, cities and counties – are more responsive to their citizens than state government. Sherman quoted George Washington University's David Brunori, professor of Public Policy at GWU, who has recently written:
"Relying on political leaders in the State Capital to fund local services, such as schools, police, fire, etc. almost guarantees those and other essential public services will be inadequately funded. When your street light is out, your potholes are unfilled, and no one is answering 911, who will you call?"
Richardson, at the urging of his fellow Republicans in the House, has backed off his initial plan to eliminate all property tax in one sweeping move that would require first passage of a resolution through the House and Senate for a referendum on a constitutional amendment.
Instead, he will only seek to do away with those property taxes that are used to fund schools. But, he is quick to say, this is his phased attempt to accomplish the same goal: end all property taxes in Georgia.
"Taxing dirt and objects [ad valorem taxes] is backwards thinking. That was 1850 when it was instituted because no one had much income. Today, Georgia's is not an agricultural economy anymore," Richardson said in an address last November to state educators. "It's a $370 billion economy. A sales tax is the fairest way to ensure everyone pays."
The current tax system based on property taxes is not only unconstitutional, but it does not equitably raise funding for schools uniformly throughout Georgia, Richardson said. If the property taxes for schools are eliminated this year, he said he fully intended to pursue "phase 2" to get rid of all property taxes the following year and replace the revenue with sales taxes.
"The ad valorem tax system is out of control," the speaker said.
GOP House members were mostly evasive about the bill's chances and about their own feelings about the speaker's plan. Clearly several when asked were not willing to go on the record.
As one legislator put it (off the record), "It's going to be hard to go back to our districts and take the heat [for HR 900]. The speaker would like to see school spending curbed and some tax relief for the property owner, but we are being asked to go fall on our swords."
But for local politicians such as Mayor Wood, the stakes are clear.
"We can give up our local control and go down to the capital every time we want something more done about our police and our fire, and our roads. Because that is where all the decisions will be made if this goes through," Wood said. "Our cities and school boards won't have any say in this. They will have the money and it will be their decision how and where to spend it.
"I can't support that at all."
- www.northfulton.com
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