Georgia’s most talked about tax reform in the past 70 years is set to take center stage in a few weeks when the legislature goes back into session.
Called the GREAT (Georgia’s Repeal of Every Ad Valorem Tax) plan, no issue has been discussed or debated more during the past six months.
Originally slated to end all property taxes and replace them with consumption taxes bolstered by eliminating the many exemptions granted over the years, the plan has now been scaled back to take a more gradual approach. Gone is the idea of eliminating all property taxes at once as well as eliminating all exemptions at once.
The most recent plan calls for each taxpayer to be credited with a homestead exemption for the full amount of their homestead’s school tax liability. Taxpayers will receive a dollar for dollar credit on their tax bills for the school portion of their tax bill.
School districts currently receiving these ad valorem taxes from residents will instead receive the amount of money they would have collected, dollar for dollar, directly from the state. The total loss throughout the state to school districts is estimated to be $1.34 billion.
Another ad valorem tax to be credited is the personal motor vehicle tax. Each taxpayer will be credited for the full amount of their personal motor vehicle ad valorem tax liability and the state will reimburse the local governments the money they would have collected, dollar for dollar. The total loss to local governments is estimated to be $424 million.
To fund the relief from these school and motor vehicle ad valorem taxes and reimburse school districts and local governments for their losses, the state will institute sales taxes on lottery tickets, groceries and certain consumer services.
Consumer services set to be taxed include the following:
• Personal services
• Services related to improving/maintaining real property
• Services related to acquisition of real property
• Household services
• Vehicle services
• Membership fees
• Moving, storage, freight
Services not to be taxed include:
• Services provided to businesses
• Medical services
• Services over $10,000 per taxpayer per vendor per year
When filing their income tax returns, low income residents will be rebated the taxes they pay on groceries.
The state will also institute a $20 motor vehicle registration fee on personal motor vehicles and a $10 fee on motor vehicles for trauma care.
The total amount of money estimated to be generated through these new taxes is almost identical to the amount needed to reimburse school boards and local governments for their lost revenues. The state has agreed to make up any shortages so that school boards and local governments will be reimbursed dollar for dollar for their losses.
Also included in this legislation is a value freeze for homesteads whereby the values for ad valorem tax purposes will be frozen at 2007 values and shall not increase by more than 1 percent per year as long as ownership is the same. When a property is sold, values will reset to the fair market value.
While the fair market value of improvements will be added to the value of a home, all taxpayers with value increases on their properties of more than 5 percent will have the right to appeal the value within 30 days of receipt of their tax bill.
The final component of the plan calls for a cap on increases in total property tax revenues for each taxing jurisdiction, whereby increases will not exceed the state government inflation rate unless a local referendum is held to approve such an increase.
Although significantly different from the original proposal, this new plan represents a dramatic change in the tax structure of our state. Whether this proposal or another of the many being floated passes, once thing is certain — change is on the way.