Options for Reducing Property Taxe David L. Sjoquist Towards a Better Understanding of Property Taxes & Proposed Policies September 11, 2008 Atlanta, Georgia
Jan 17, 2016
Options for Reducing Property Taxes
David L. Sjoquist
Towards a Better Understanding ofProperty Taxes & Proposed Policies
September 11, 2008Atlanta, Georgia
What is the problem?
•Local governments are spending too much
•Property taxes are too high
•Large annual increases in assessed value•Tax increases are too large
•Not fair/equitable
•Elderly are forced to sell
•Residential vs. business burden is wrong
•Reduces economic development
•Capital gain is taxed but not realized
Three Options for ReducingProperty Tax Burden
• State funding of education
• Grants to local governments • Targeted tax credits
I. State funding of education
• Increase QBE to $8,000 per FTE
• Districts under $8,000: eliminate PT
• Districts over $8,000: allow supplement
• Set an allowable annual increase
• Districts assured of annual increase:• From the state• From prop tax
Current (FY 2007)Revenue
(in millions)Revenue per FTE
Local $5,767 $3,604State $7,201 $4,500Total $12,968 $8,104
ProposalRevenue
(in millions)Revenue per FTE
Local $611 $382State $12,803 $8,000Total $13,414 $8,382
Prop Tax Reduction = $5,156 millionIncreased funding = $445 million
% reduction in local rev: 89%Districts with 0 tax: 109
II. Matching Grant
•State grant = fraction of prop tax
•Require an equal cut in prop tax
•Set a limit for increase in grant
Example
Current Property tax = $100 million
Grant = ½ of prop tax ($50 million)
Cut property tax to $50 million
Future: match prop tax $ for $
What about the 2nd year?
Suppose increase is limited to 5%
Case A:Prop tax stay at $50 millionMatching Grant is $50 million
Case B:Prop tax increases to $52.5 millionMatching Grant is $52.5 million
Case C:Prop tax increases to $54 millionMatching grant is $52.5 million
III. Targeted Tax Credit
Credit = Property Tax in excessof some fraction of income
Example
Property tax = $1500Income = $30,000Fraction = 4%
4% of $30,000 = $1200
Credit = $1500 – $1200 = $300
Eligibility and Limitations
• Age• Income• Owner-Renter• Maximum credit
Relief with 4%Homeowners only
Maximum
Income
AgeLimit
Property Tax Relief(in millions)
% of Owners
None None $400 17.0%$50,000 None $247 12.4%$50,000 62 $98 5.0%
Fiscal Research CenterAndrew Young School of Policy StudiesGeorgia State UniversityAtlanta, GA FRC Report No. 182August 2008
For copies of reports,see the FRC website:
http://FRC.GSU.EDU
A Brief History of the Property Tax in Georgia
David L. Sjoquist