The temporary property tax change for disaster areas amendment would authorize local governments to grant temporary property tax changes for properties damaged by disaster events and located within disaster areas.
This property tax amendment would change the Georgia constitution to allow local governments to grant temporary property tax changes for properties damaged by disaster events and located within disaster areas. Some details of the tax relief mechanism and rules governing local government use of this power will likely need to be legislated.
State Rep. Lynn Smith (R) sponsored the constitutional amendment after an EF-4 tornado—the Enhanced Fujita Scale ranks tornados from zero to five, with five being the most devastating—hit Coweta County in the southwestern exurbs of Atlanta in March 2021. The Federal Emergency Management Agency (FEMA) rejected individual disaster assistance, however. In July 2021, the Atlanta Journal-Constitution reported:
In a letter this week to Gov. Brian Kemp, the Federal Emergency Management Agency wrote “the impact to the individuals and households from this event was not of the severity and magnitude to warrant the designation of the Individual Assistance program.” Such assistance includes financial aid and services for people with uninsured expenses…In May, President Joe Biden declared a disaster in Georgia, making federal funding available for state and local government recovery efforts in Coweta and other counties. But many residents with uninsured property losses are still struggling in the wake of the storm, Newnan Mayor Keith Brady said.
…FEMA issued a prepared statement Friday, saying Kemp appealed its “original denial of Individual Assistance and FEMA found that its original evaluation was correct.”
“The biggest factor when determining the need for either public or individual assistance is whether the state and local jurisdictions have the resources available to meet the recovery needs,” the agency said.
In addition to the federal government’s decision not to provide federal taxpayer-funded assistance, state law prevented any type of tax breaks for property damaged by natural disasters. Therefore, Coweta County homeowners had to pay property taxes on 1,726 homes that were destroyed or damaged.
Rep. Smith said officials in the city of Newnan “wanted to be able to give some tax relief in 2021” but were not able to do so. The amendment was passed unanimously by both chambers of the Georgia State Legislature.
The average Georgia property tax bill is $1,771 per year. If this figure is applied to all 1,726 homes devastated by the 2021 tornado to give an estimate, exempting those families from paying taxes would reduce total property tax revenue by $3.1 million annually.
However, the amendment would not apply just to the Coweta County homes. All property in Georgia that is affected by various natural disasters could be exempted from property taxes, which would increase the fiscal impact. For example, if three percent of properties qualified for exemptions in a year, that would total $204 million per year.
Proponents’ Arguments For
Proponents wanted federal taxpayers to aid the tornado victims. “It still breaks my heart that federal funding was denied for individuals, but HR 594 would allow local governments to step in and provide an alternative pathway to direct relief for citizens in the future, especially if the federal government in Washington fails to do so,” State Rep. Lynn Smith (R) stated.
She added that the amendment “provides this option to communities who may face the same devastation that Coweta County did last year.”
Opponents’ Arguments Against
There were no arguments against the bill. No members voted against the bill. However, 29 members of the Georgia House of Representatives and one state senator abstained. Further, there were no Democratic cosponsors, potentially indicating limited support from Democrats.
When a property is damaged due to a natural disaster, FEMA determines whether state and local governments have the resources to provide sufficient aid. The largest factor in FEMA approving or denying aid to homeowners is if a county and/or city government have the resources to provide their own financial aid. Local officials In Coweta County and the city of Newnan wanted to waive the collection of property taxes, but state law prevented the county and city from taking those actions. As a result, Rep. Smith sponsored an amendment to allow counties to waive the collection of property taxes from those homeowners whose property is uninhabitable.
On one hand, the legislation provides important relief to homeowners. It does not require local governments to provide funding. Rather, it allows governments to waive the collection of property taxes.
If the federal government does not provide resources, state and/or local governments can provide direct financial resources, waive property taxes, both, or neither.
However, this amendment also creates three policy challenges, each relating to wealth transfers. First, many homeowners in Coweta County were underinsured or uninsured. This property tax relief bails them out. And in the future, it incentivizes homeowners to underinsure their own properties because they may expect other taxpayers to foot the bill.
Second, the tax exemption could lead to a major loss in revenue for counties. Georgia has 159 counties and thousands of cities. If fires, flooding, hail storms, tornados, and other issues can prompt property tax exemptions, it is easy to see the number of exemptions growing exponentially in the years to come. And, even if only 3% of homes had property taxes waived in a given year, the statewide loss would be more than $200 million. Counties are likely to try to offset those losses by imposing higher property taxes on other homeowners or new taxes or fees.
Finally, the tax exemption allows FEMA’s outdated, 20th-century approach to disbursing disaster aid to continue. Currently, FEMA justifies whether to provide federal aid based on the average income and wealth of a region. Yes, many of the homeowners in Coweta County lived in mobile homes and were below the average federal income, but FEMA ruled the local and state governments had the funding to assist them rather than asking federal taxpayers to do so. Going forward, FEMA could improve by determining this type of federal aid based on census block grants, a more detailed geographic unit.