A lot of homeowners in northeast Georgia felt their blood pressure go up this year when they got their updated property assessments.
Skyrocketing property values have pushed up tax assessments, in some cases by double or even triple digits.
The reaction in many communities has been swift and loud — people want their assessments and taxes lowered.
So what's going on here and how are we to assess the assessments?
This is a complicated issue, one that I don't relish writing about.
Property taxes are not just financial, they're emotional. They hit us at home. Surveys show they are the most hated tax in America; some call them "un-American."
Well, that's not really accurate. Taxation on property goes back to the founding of the nation, coming over from England which had a property tax system dating back to the Norman Conquest in 1066.
But it’s never been popular. There have been revolts over the years from disgruntled property owners. Still, the system survives.
Because of two main things: First, it's a stable source of income, which local governments want. Second, and more importantly, nobody has come up with a better plan to fund local governments that doesn't also have major drawbacks.
To really understand the nature of property taxation, you first have to realize that it's not just one thing, but rather is a collection of a lot of different things.
The most common, of course, are taxes on our houses. That tends to be the main focus when people get upset.
But it's also taxes on personal property (boats, cars, etc.), raw land, commercial and industrial buildings and business equipment.
And all of those things are treated differently. Raw land, for example, often gets special tax exemptions for agricultural use. Those exemptions artificially lower the amount of taxes paid on the land, depending on how it's being used for agricultural purposes (Conservation Use is the largest special exemption for agriculture.)
On the other end, industries also get some exemptions, especially on goods they manufacture that are going to be shipped to other locations (Freeport exemption). Sometimes, large industries get other property tax breaks granted by local governments as an incentive to locate in a community. That was the case with SK Battery in Commerce, which is paying a predetermined amount of dollars to local governments in lieu of paying regular property taxes.
But residential homeowners also get some tax breaks from various kinds of homestead exemptions. If you live in a house, you may qualify for one or more homestead exemptions, depending on your age, income and other factors. (It doesn't apply to investor property where a house is rented out.)
Some properties get the ultimate tax break — no taxes. Religious groups and some non-profit organizations are exempt from paying property taxes on certain kinds of property they own.
That's the very broad brush of property classifications.
So why are so many people upset this year?
Property taxes are the function of two numbers: The value (assessment) of a property and the millage (tax) rate.
This year, assessments have gone up a lot for many homeowners.
In a word, capitalism.
It's the free market of supply (a shortage of houses) facing demand (a rising number of people wanting to buy a house.)
That shortage vs. demand has happened due to several mitigating factors: Covid slowed the building of new houses last year and the production of lumber; more younger people are reaching the age where they want to buy a house; artificially low interest rates; and in our area, a boom in industrial growth creating more jobs is also creating more demand for housing.
All of that has pushed up the price of lumber and other building materials and has led the marketplace to do some crazy things, such as prospective buyers offering more for a house than the seller was asking for. Bidding wars for a house today are not uncommon.
All of that has raised the "fair market" value of existing houses, too. The hot market has made that $250,000 house worth much more now, maybe up to $350,000 in some locations.
That's why local assessments are up. When the gurus who crunch all the assessment numbers look at local sales data, they see prices soaring. That ripples across the community, sending up other home values.
There are two parts to assessments: Finding a "fair market value" and making sure those values are more or less equal in a geographic area. In effect, your neighbors who sold their homes last year for top-dollar helped push up your assessment.
(The state monitors this system by comparing local assessments to actual sales. If the county is too high or too low, it gets penalized. That is the audit check on the system to keep local governments from monkeying with the numbers.)
But assessments are just one factor in property taxation, and this is where there is a lot of confusion.
The state mandates that when property owners are sent a reassessment notice, that notice must also have an estimated tax amount based on the previous year's millage rates.
That's confusing. No local government has actually set its millage rate this year, but those assessment notices often look like a tax bill.
It's a dumb system that needs reform.
As a result of these higher assessments, some local citizens have shown up at local government meetings to raise hell.
This isn't the first time. Periodically, reassessments create this kind of furor. I've covered a lot of meetings over the last four decades when people came to complain about their assessments or taxes.
There's a common thread in this: Almost always, older citizens want to stop paying school taxes. They feel that since they don't have children in school, they shouldn't have to pay to educate other people's children.
In addition, there's been a financial trend over the last 30 years of senior citizens discounts on everything from a cup of coffee to a movie ticket. Older citizens have been conditioned by society to expect a break. That includes a break on their taxes.
But some of that goes too far.
If we're going to discount taxes for senior citizens under the idea that they don't have children in school, shouldn't we do the same thing for childless young couples? For single adults with no children?
It's also a misnomer for seniors to argue that they live on a "fixed income." Well, everyone lives on a "fixed income." Nobody I know can pay themselves whatever they want.
It's also a mistaken notion that local senior citizens don't get a tax break on school taxes. They do.
In both Jackson and Banks counties, those over age 62 qualify for homestead exemptions from school taxes. There are several kinds of these exemptions: In Jackson County, for example, those over age 65 who have less than $18,000 in earned household income qualify for a $50,000 exemption. In Banks County, those over 65 qualify for a $20,000 exemption and in some cases, could qualify for an additional exemption. In Barrow County, those over 65 qualify for a $10,000 school tax exemption, and those ages 62-65 who have an annual gross income of $10,000 or less qualify for a $10,000 school tax exemption.
It's confusing and every individual situation is different. But there are discounts for senior citizens out there.
There are those who want to abolish all school taxes for those over age 65. But for now, that's a pipe dream in this area.
Neither Banks nor Jackson nor Barrow counties have enough of an industrial tax base to subsidize school taxes to the point where all senior citizen property taxes can be abated. It just isn't doable, especially given all the growth happening in the area and the resulting pressure on schools to build more classrooms and hire more teachers.
Unlike county or city governments, school systems don't have a wide variety of income. They are heavily dependent on property taxes. In addition, school systems have state mandates to fund various programs that they can't refuse to do. To a large extent, local school budgets are state mandates; local boards of education don't have much wiggle room to make cuts.
No school system can afford to lose funding by doing away with senior citizen property taxes. It's just not going to happen.
At best, senior citizens might be able to get an adjustment to existing homestead exemptions by raising the income caps or by raising the exclusion amount.
Anything more than that is a dream that isn't going to happen anytime soon.