Summary
Georgia Referendum A would increase the personal property tax exemption from $7,500 to $20,000, meaning that people would not have to pay county personal property taxes on property valued up to that amount. In Georgia, the most common types of personal property are business inventory, farm machinery, and motor vehicles. Motor vehicles, trailers, or mobile homes would not receive the exemption.
Fiscal Impact
Since the state does not collect personal property taxes, there is no impact on state revenue.
However, county and city revenue would be affected. Reason Foundation estimates, based on the 123 counties that could increase the exemption for personal property taxes, that the revenue loss could be as high as $250 million annually. However, some counties may choose to hike the millage rate as well, offsetting some of the revenue loss.
Proponents’ Arguments
One argument is the amendment would provide a needed tax break to small businesses in Georgia. State Rep. Mike Cheokas (R-Americus) sponsored the constitutional amendment “to help reduce the burden of high taxes and prohibitive regulations that adversely affect businesses in Georgia.” The Georgia Chamber argues that the bill will contribute to the continued success of the state’s pro-business environment by lowering taxes for businesses and will encourage more businesses to relocate to Georgia, providing additional jobs and more net revenue in the long term.
Opponents’ Arguments
The Associated County Commissioners of Georgia and the Georgia Municipal Association opposed the bill creating this amendment on their websites, but neither provided any public rationale. The Atlanta Journal-Constitution argued that the amendment, if passed, could reduce funding for education and other purposes. Forty-two House Democrats voted against the original $50,000 exemption, and 13 were either excused or did not vote. However, none publicly expressed their rationale. The bill passed unanimously in the Senate.
Discussion
This measure would provide important tax relief to property owners. It counters the increasing tax burden on property due to rising property values and inflation. Further, it provides needed tax relief to lower-income residents.
The legislation comes at a time of high inflation and government expenditures. Georgia’s personal property exemption level is not indexed to inflation. The House bill increased the exemption to $50,000, but to secure enough votes for passage in the Senate, it was lowered to $20,000.
Georgia’s property taxes are administered at the county level and used for general budget expenditures such as education and public safety. While more populous and growing counties have the resources to overcome the revenue loss from this tax cut, many rural counties declining in population might not.
This amendment would create some distortions because it treats similar types of property differently. For example, some types of transportation vehicles such as motor vehicles, trailers, and motor homes are not granted the exception whereas airplanes and boats receive the exemption.