As early voting kicks off, Georgians will decide at the polling booth whether increases in the assessed value of someone’s primary residence should be capped at the inflation rate statewide. Doing so would limit property tax hikes.
The Local Option Homestead Property Tax Exemption Amendment, as the constitutional amendment is called, is one of three voter referendums on the ballot statewide.
The goal of the change, backers have said, is to reduce the property tax burden on homeowners, whose tax bills typically increase as their property values rise.
The mostly Republican state lawmakers who championed the legislation that spurred the referendum also claim approving it would prevent “back door” tax hikes by local governments that collect more revenue when home values spike, the Associated Press reported.
Opponents, however, including some school boards, have cautioned that capping property value assessments, and thus taxes, could deprive schools — which rely heavily on property taxes for funding — and other public services of much-needed revenue.
Kyle Kessler, the policy and research director for the Center for Civic Innovation, warned, “If this thing passes, we will further entrench the benefits of homeownership, regardless of someone’s ability to pay their property taxes.”
Those benefits, he added, would disproportionately reward wealthier homeowners. After all, capping the fair market assessment value of a $10 million home results in a much bigger property tax savings than capping the assessment for a $100,000 home.
For example, assume the fair market value of someone’s primary residence is assessed at $10 million in 2025, but that increases by 20% to $12,000,000 the following year. If the 2025 inflation rate is 3.5%, the increase would instead be capped at $350,000, for a 2026 assessed value of $10,350,000. The $1,650,000 difference (between the $2,000,000 market increase and the $350,000 inflation rate increase) is the tax-exempt amount.
“I would not see how this would do anything but further [widen] the income and wealth gap in Atlanta or across the state,” Kessler said.
The actual ballot language
The ballot question reads in full:
“Shall the constitution of Georgia be amended so as to authorize the General Assembly to provide by general law for a state-wide homestead exemption that serves to limit increases in the assessed value of households, but which any county, consolidated government, municipality, or local school system may opt out of upon the completion of certain procedures?”
In common parlance, a “Yes” vote means the state would limit how much the assessed value of a home could go up each year for tax purposes to the annual inflation rate (currently 2.1% for the Southeast). The cap would only apply to someone’s primary residence, or homestead, not second homes or commercial properties.
If approved, the measure would take effect Jan. 1, 2025. There is an opt-out clause for local governments that prefer to manage their own assessments of property values for tax purposes. But city or county governments or local school boards would only have until March 2025 — just two months after the amendment’s effective date — to opt out.
Voting “No” means it would remain up to local governments to decide how much (if any) to increase a property valuation each year for tax purposes.
“The ballot language is super simple and sort of shows, ‘Yeah, why wouldn’t I want to support cheaper tax bills for people who own homes?’” Kessler said. “But in practice, I think it’s going to be challenging for local jurisdictions to opt out of it, because there’s such a short time window.”
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Unanticipated consequences
Julian Bene, a local property tax watchdog and former Invest Atlanta board member, also opposes the amendment, saying that “tax revenues should be rising with inflation.”
He suggested that passing the ballot measure could lead some local governments to simply opt out. But if they don’t, they could instead increase their millage (property tax) rates to avoid losing a chunk of their tax digest (the sum of the assessed values of properties to be taxed). Some don’t have that option, however, since they’ve already maxed their property tax rates out according to state law, he said.
“I suspect that in a lot of the smaller and less liberal municipalities in the state, they probably need the revenue, but they won’t be able to raise the millage rate if this thing passes,” Bene said.
But if local governments were able to raise millage rates across the board to offset the potential hit to their tax bases from this homestead exemption, those property tax increases could be passed on to renters, Kessler noted.
“If I’m a multifamily apartment owner, and I know that I can relatively easily and painlessly just pass along my higher tax bill to my tenants via rent, then why should I go and fight the city on [tax assessments]?” he said. “So the average renter, who doesn’t get a homestead exemption in the first place, is going to see their rent go higher and higher, because their landlord isn’t going to fight this stuff.”
Lower and middle income homeowners, particularly those who pay their property taxes through escrow, are facing higher and higher monthly mortgage payments due to rampant property tax increases. Although this tax relief is regressive by definition, homeowners whose very ability to pay property taxes (directly or through escrow) is threatened, will receive a larger relative benefit to their necessary household expenses.
Curious how gentrified neighborhoods play into this
So basically if this bill passes, the local municipalities can just increase the millage rate to make up for the loss? Sounds like a lose, lose shituation to me.