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Options for Reducing Property Taxes

Options for Reducing Property Taxes. David L. Sjoquist. Towards a Better Understanding of Property Taxes & Proposed Policies September 11, 2008 Atlanta, Georgia. What is the problem?. Large annual increases in assessed value. Tax increases are too large. Not fair/equitable.

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Options for Reducing Property Taxes

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  1. Options for Reducing Property Taxes David L. Sjoquist Towards a Better Understanding of Property Taxes & Proposed Policies September 11, 2008 Atlanta, Georgia

  2. What is the problem? • 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 • Property taxes are too high • Local governments are spending too much

  3. Three Options for Reducing Property Tax Burden • State funding of education • Grants to local governments • Targeted tax credits

  4. 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

  5. Prop Tax Reduction = $5,156 million Increased funding = $445 million % reduction in local rev: 89% Districts with 0 tax: 109

  6. II. Matching Grant • State grant = fraction of prop tax • Require an equal cut in prop tax • Set a limit for increase in grant

  7. Example Current Property tax = $100 million Grant = ½ of prop tax ($50 million) Cut property tax to $50 million Future: match prop tax $ for $

  8. What about the 2nd year? Suppose increase is limited to 5% Case A: Prop tax stay at $50 million Matching Grant is $50 million Case B: Prop tax increases to $52.5 million Matching Grant is $52.5 million

  9. Case C: Prop tax increases to $54 million Matching grant is $52.5 million

  10. III. Targeted Tax Credit Credit = Property Tax in excess of some fraction of income

  11. Example Property tax = $1500 Income = $30,000 Fraction = 4% 4% of $30,000 = $1200 Credit = $1500 – $1200 = $300

  12. Eligibility and Limitations • Age • Income • Owner-Renter • Maximum credit

  13. Relief with 4% Homeowners only

  14. For copies of reports, see the FRC website: http://FRC.GSU.EDU A Brief History of the Property Tax in Georgia David L. Sjoquist Fiscal Research Center Andrew Young School of Policy Studies Georgia State University Atlanta, GA FRC Report No. 182 August 2008

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