What Tax Bills at the House May Impact Your Tax Bills at Your House

Recently our Georgia House of Representatives voted on an amendment to the Georgia State Constitution that would have started a process to eliminate property taxes on owner occupied property in the form of a 100% homestead exemption. 

Local governments would be given the option to add up to an additional two cents of sales tax to offset lost property taxes, however, it is important to note that the local governments will still receive property taxes from all property that is not subject to homestead protection such as business property.

The vote failed to gain the necessary two thirds majority necessary to pass an amendment. The house leadership then pivoted to a less ambitious bill, HB 1116, which would cap how fast property tax revenues can grow and shift more of the burden to sales taxes. The plan would cap growth in ad valorem property tax revenue at 3% a year or the rate of inflation, whichever is higher, and allow local governments to adjust sales taxes to help offset homestead property tax bills. 

To some, this will seem like a do over for HB 581 where voters voted to limit property tax growth, only to be vetoed by local governments concerned about their revenue stream. The ability to impose more sales tax as an offset seems like an attempt to address the concerns of local leaders.

At the same time, the Georgia State Senate has proposed SB 476 and 477, which would remove up to two thirds of Georgia taxpayers from the state income tax rolls. 

SB 476 would make the first $50,000 of taxable income for individuals exempt from tax with $100,000 for married couples. SB 477 lowers the rate over time from 5.19% in 2026, then to 4.99% in 2027 and possibly to 3.99% in 2028 contingent on revenue growth.

Both proposals have made it through “cross over day” and appear ready to become law.

While I agree with these bills and look forward to them becoming law, I am concerned that some of these proposals may not be completely vetted.

For example, Georgia is constitutionally obligated to fund public education using its quality basic education (QBE) formula. When the state has fallen short on revenue in the past, they have passed these shortages along to the local districts to either make cuts to education or find local funding.

This is the concern of many school boards, including Coweta, who vetoed the will of the voters when they opted out of HB 581 which had the same property tax growth limits as in HB1116.

School costs are more than 80% personnel costs with benefits, and other items growing at more than 3%. Some may argue that there is “fat” to cut, but these choices tend to have specific impact. In the recent past, class size has been increased, parapro K-1 support decreased, and other auxiliary school support eliminated. These were all reduced to offset increasing costs and reduced funding. Some systems still have the option of raising the school tax millage rate, others will need to use sales taxes to offset future cost.

The option to impose a sales tax (regardless of acronym)  may have an adverse effect on future ESPLOSTs which could impact capital expenditures for schools and local municipalities.

Taxpayers need and deserve this break from the relentless growth of property taxes which have grown at a faster rate than salaries on an overall basis. However, as we meet candidates for our legislature and local offices, we need to hear their plans to manage without endless resources and their plans on how to address funding in the future.