This week in the Georgia House, lawmakers voted overwhelmingly (166-5) to approve property tax cuts, including the elimination of the state's car tax, that will cost the state more than $750 million when fully phased in. Republican Speaker Pro Tem Mark Burkhalter doesn't seem concerned with offsetting the lost revenue. Responding to concerns about the plan's price tag, he says, "It's very simple. You cut taxes, the economy grows. The economy grows, Georgians prosper. The best way to stem off any recession is to cut taxes. Not to clam up, go home and wait for the storm to pass." We've learned on the federal level that tax cuts simply don't pay for themselves, but clearly legislators in Georgia want to try their own experiment with this flawed (and dangerous) economic myth. The House-passed bill contains another misguided property tax change... a 2% cap on annual increases in a home's value for tax purposes (the cap would be 3% for businesses).
The Georgia Budget and Policy Institute issued a report adding up the costs of the state House's handiwork related to taxes this year and found that the tax bills passed this session would cost as much as $113 million in FY 2009, $473 million in FY 2010, and $798 million in FY 2011.
Coincidentally, the Oklahoma Senate passed a proposed constitutional amendment last week also dealing with caps on increases in a home's taxable value. In this case, the cap would be decreased from 5% to 3% (the 5% cap would remain intact for businesses). Assessment value caps of this sort have recently received much attention in Florida. The unfair way in which these caps provide the greatest relief to long-time residents (creating vastly different property tax bills between neighbors with similar houses) recently drove Florida residents to amend their constitution to patch over the problem in a very imperfect way.
Rounding out the recent trend in debating poorly reasoned property tax cuts is Arizona, where the House narrowly approved a measure to permanently repeal a portion of the property tax that is currently suspended. Allowing the tax to take effect again would raise about $250 million annually for the state, significantly reducing the projected $1.2 billion revenue shortfall for the current fiscal year. If the plan passes, cuts in public services could be the result.