The Property Tax Model is Broken Beyond Repair

Let’s be honest. The system of collecting taxes for county, city, and school taxes is broken. And the larger the area dependent on funding from property taxes, the more broken it becomes. North Fulton County residents pay tremendously more for the same county services than South Fulton residents.  Why?

Here are three reasons it needs to be scrapped:

  1. There is no correlation between the amount of taxes you pay and the amount of “services” you receive.

A family of six living in a $500,000 home and a family of two living in a $500,000 home, pay the same property taxes if they live in the same community.  Why?  What makes us feel its fair to collect three times as much tax on a per capita basis from one family than another?  What if the family of two lives in a home worth one million?  What makes it right to collect six times as much for the very same levels of services?  Should I mention that the family of six likely creates more demand for services than the family of two as well?

When property values are high, and tax rates are high, this can have the effect of driving out empty nester residents to avoid the high levels of taxes relative to the services they receive for those tax dollars.

2.  Property values rising(and falling) should have no impact on how much tax revenue is needed to run your county, cities, and schools.

We’ve seen property values fall during recessions and rise during better times.  This should have nothing to do with how many dollars are needed to provide services in your community.  Yet we have made the tax digest the first step in the taxation process, followed by each government agency voting on the millage rate to be applied to that tax digest.  Elected officials vote far more often on how much they will tax you than you have a chance to vote on whether or not they should remain in office.

Let’s add to that the huge infrastructure we now have in place at the Tax Assessor’s office to track every piece of property, every structure, and every improvement you make to your home, all in the effort to make sure every $ of real estate(real or imagined) is taxed.

Why on earth should you owe the government more dollars because you decided to finish your basement or add a deck?

The perverseness of this likely discourages residents from making improvements to their properties.

How much time and energy is used by the Tax Assessor’s office to gather all of this information?  How accurate is it?  Is it worth it?  Who is really benefitting?

3.  How many hours of effort will the Public spend appealing these assessments?

If 1/4 of the households in Johns Creek appeal, that could be as high as 7,000 homes.  Spend five hours on this process, and cumulatively we will have spent 35,000 hours fighting our high assessments.

Instead, why don’t we take a moment and consider a different system?  We do not tax each resident within an HOA a variable amount do we?  It’s a flat rate per household.  While not necessarily the same on a per capita basis, it is a fairer system than taxing each household based upon the value of their property.

What would a fixed property tax collected per residence look like?  First, it would treat all of us as equally as possible.

We would not need an army of government employees tracking our properties, needing to know everything about the inside and outside of our homes.

We would never have to appeal property taxes in the future.

Our governments would be accountable to us directly for the rate of taxation we face, and there would be no finger-pointing as to who is to blame.

The current system of taxation has more expensive property owners subsidizing the less expensive property owners.  In a society where wealth redistribution is frowned upon by most of us, it is curious to me why we are so willing to allow tax redistribution with property taxes, where the level of services received are so far removed from what the property owner pays in taxes.

Johns Creek could lead the way to a better model of taxation for its residents.  It’s time we slay the beast that taxation based on property values has become.   Taxation should not be unfair or onerous.

It’s time for a change.  Contact your locally elected officials and tell them you want a different system.  Tell them you want a better, more equitable system.

2 thoughts on “The Property Tax Model is Broken Beyond Repair

  1. Hi EJ,
    Thanks for your input regarding scrapping the current property tax system in place. It seems you are in favor of a “flat” property tax across the board rather than an assessment based on property value. I’ve had the opportunity to review your justifications, and to some extent, I can agree. However, I have a few rebuttals to present regarding this. I’ll attempt to present my side:

    1. There is no correlation between the amount of taxes you pay and the amount of “services” you receive. This is actually true. However, even if the tax were the same for all households in the taxing jurisdiction, there would still be no correlation between inflows and outflows on a per-parcel basis, as many of those “services” aren’t applicable to all residents. Further, you argue: Why should a family of two living in a $0.5M house pay the same amount as a family of six living in that same house? On a flat rate of $6,000/yr (arbitrary number for ease of calculation), that family of two is paying $3,000/person, where that same $6k is spread out to $500 for the family of six, so it’s still skewed from a per-capita perspective.

    2. Property values rising(and falling) should have no impact on how much tax revenue is needed to run your county, cities, and schools. They don’t. The budget is set and approved before Assessment notices are sent out. You can look it up on Fulton County’s website (might have to search a little), and possibly on JC’s website for the city budget. For Fulton Schools, theirs *may* be on the schools website. In any case, I suspect your argument is more to the tune of “Property values rising and falling should have no impact on how much an individual homeowner pays toward said tax revenue”. But rising and falling values only aid in determining the overall millage rate which is set in July.

    Although assessment appeals are relevant to this discussion, I will not elaborate on them for the sake of simplicity.

    Finally, you bring up the fact that Homeowner Association assessments are, in general, not variable. More appropriately, they are not established based on the value of a particular member’s property. This is a valid argument, but understand that there are a few components of contention between HOA assessments and property taxes. First (and probably most importantly), nowhere in an associations budget is there any line item for expenditures benefiting persons based on income. Every household in a neighborhood bound by an association is equally entitled to ALL components of that association’s budget. That is not necessarily true when it comes to municipal and higher governance.

    Second, HOA assessments are not deductible to the typical homeowner. The ad valorem property taxes we pay ARE deductible. The second you convert the property tax model to a flat tax per household, you eliminate that deduction. The reason is, per the IRS, the ONLY deductible assessments are those directly attributable to a property’s value and assessed on a recurring basis (which is why for vehicle registrations, the Title Ad-Valorem Tax is not deductible, as it is assessed once, as opposed to the annual vehicle ad-valorem tax which was).

    While I am not for any blatant “redistribution of wealth” system, and I am for a far more efficient and streamlined government, the problem with your system is the same as the problem with the current broken system. The only significant difference between the two are the beneficiaries of the systems. The current system “hurts” those that live in more expensive homes and “benefits” those that live in less expensive homes. Your proposed system aids higher income families while placing greater burden on lower income families.

    If you can come up with a system that reduces the overall tax burden while maintaining the benefit to lower-income families and still providing the same (or even better, greater) quality services for the people as a whole, please let me know.

  2. Property taxes are tax deductible. However, many residents file can still claim their standard deduction, which would reduce the impact of losing the “opportunity” to deduct the cost of your property taxes by whatever your marginal tax rate. That is still not a reason to continue with a flawed tax.

    I’d like to see a system where the tax was based on per capita per household. But that system would invite cheating. And I am not ever going to want government counting the people living under one roof for tax purposes.

    Have a look at this for some other ideas on property taxes if you have not already seen it.

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