The first piece of legislation filed for the 2009 legislative session, HR 1, sounds like a dream.  If it passes, in December 2010, the state will freeze the value of your home (for property tax purposes), and the assessed value can only go up a max of 3% per year until you sell it.  Sounds great, right?  From now on, you’ll know exactly how much you’ll pay in property taxes, and you’ll never be surprised by a tax bill again. 

Wrong.

But this is the fairest possible system, right?

Wrong again. 

Georgia, like most other states, has historically believed that the amount you contribute to local government for the municipal and county services you enjoy ( like police, fire, road maintenance, water and sewer, clean parks, and good schools, to name a few) should be paid for based on your financial capacity.  The value of your home is the first step, and then comes the millage rate.  That rate has to be equal across the class of property.  So, freezing your valuation and capping your assessment simply puts the pressure on the millage rate, which can still go as high as the elected officials decide.  However, if you happen to come late to the housing market, you may pay exponentially more than your neighbor for the exact same services.  What could be less fair?

Let me explain.  Imagine your best friend at work finds the perfect house.  She makes an offer of $100,000 and the seller accepts it.  A month later, you decide that you’re ready for your first house too.  Because she has raved about it, you buy the house next door.  Same house, but the sale price is now $200,000.  As Georgians and as Americans, we support the right of the seller to raise the market price.  So now, you’ve got a slightly higher mortgage rate than your neighbor, which is perfectly fine.  She did her homework first and bought early. The market controls.

Remember, though, you and your neighbor have the same salary and now the same house.  When you call the police because of suspicious activity, the same cop comes to check it out.  A fire brings the same truck.  When you leave for work, you drive on the exact same road.  Your kids go to the same school and have the same teachers.  Only, because she bought a house a month before you, when tax time rolls around, she pays a whole lot less for those services.  Because of the point in time when she bought her house, she enjoys a significant discount on the exact same services – for as long as she owns the house. 

Unfortunately, the price of health care goes up and the county has to increase its payments for its employees.  And the price of asphalt rises, which makes road repair work even more expensive.  Teachers need modest pay raises to keep up with the cost of living.  To keep pace, the local government increases the millage rate to generate the revenue necessary to keep you safe and protected.  But because she has a lower valuation for the exact same house, her tax bill grows at a much slower rate than yours.  Is that fair?

Tax philosophy says no.  For centuries, we have decided that it is fairer to expect contributions from citizens based roughly on their economic means – not based on which day they happened to buy their house.  So, instead of your neighbor enjoying a frozen value of $100,000 while you and all of your new neighbors foot the bill for her, we have a different system, which begins with reassessment.

Reassessment has one primary purpose:  to level the playing field for people with the same economic means and approximately the same property.  Basically, we believe that you should pay for what you get.  The way to figure out what’s level in this case is by assessing the house you own.  Any economist will tell you, people tend to buy the most house they can afford, so it’s a good proxy for income.

So, let’s go back to the year you moved in next door.  The property assessors come around and they decide that your house and your neighbor’s house are identical.  As a result, your property is equalized or reassessed, to bring your values in line.  Instead of her house being treated as worth $100,000 and yours at $200,000 – now you’re both given a valuation of $200,000.  When the millage rate is applied, you now pay the same amount for the same services. 

This is fairness, both for taxpayers and the market.  Police officers and school teachers don’t know when you bought your house, but they expect to receive paychecks that compensate them for their work.  Also, like you and your neighbor, they expect government to not discriminate based on a random point in time. 

Reassessment has its flaws.  In Georgia, we reassess too often and we rarely acknowledge that property values decline.  In recent years, mega-houses have come in and skewed the value for the whole neighborhood, and that’s not fair either.  Seniors on fixed income require special treatment, and there must be more accountability in the system.  During this legislative session, we will introduce legislation to address those issues. 

However, we cannot walk away from a bedrock principal of our stable tax system – paying your taxes shouldn’t be a lottery.  It is the price we pay for safety, stability and schools.  And we should all pay our fair share.  It’s the Georgia way.