What’s it to Utz? – Depth and taxes
By Hans Utz
There are few topics that can ignite a debate as sharply as taxes. I suspect the reason for this is twofold:
1) No one enjoys paying taxes, and
2) The compromises necessary to run any government mean that taxes are rarely spent exactly the way any one individual prefers.
The net effect is that you are forced to pay money you’d rather not for an imperfect list of things you may not all want. That’s a recipe for annoyance.
Add to that the public’s general lack of awareness of how property taxes work, and the annoyance can morph into downright anger in some cases.
So how do your property taxes work? Let me explain.
First, the basics. There are five things that impact the size of your property tax bill:
– The appraised value of your home, or the value of your home as determined by the county.
– The assessed value of your home, or the portion of your home’s appraised value against which the jurisdiction levies taxes. This is often a surprising detail to people, and I admit it is a weird concept. We’ll discuss it in more depth in a minute.
– The exemptions and credits available to you based upon factors such as sales tax offsets, your home’s location, your personal income, your age, etc. Exemptions are counted against the assessed value of the home. Credits are straight reductions in the amount you have to pay. Both have the effect of reducing your tax bill.
– The tax rate, also called the millage rate, which determines the amount of dollars you pay proportionate to the value of your home.
– Service fees, such as Sanitation and Stormwater, which are for services received by homeowners and paid as a part of the property tax bill.
Several elected entities independently establish portions of your property tax bill. This is an important point that many people do not realize: no one entity controls your entire bill.
The Appraised Value
The appraised value of your home is fairly straightforward. Every year (yes, every year) DeKalb County appraises your home to establish its value for tax purposes. This appraisal is not discretionary by the county. The state constitution requires it.
DeKalb uses a computer program that takes into account a host of variables, including size, age of the home, nearby property values, deed restrictions, etc., to arrive at the appraised value.
Now, I’m not saying that this is a perfect process, and I’m not saying you have to agree with the county’s appraisal. In fact, if you disagree and have data to support the disagreement, I recommend you appeal. All I am saying is that it is required for every home to be run through the appraisal process every year to arrive at a value.
According to Zillow, the average fair market value of a home in Decatur is approximately $400,000.
The Assessed Value
The Georgia constitution requires that property be assessed for tax purposes at 40 percent of the appraised value. So if the county appraised your home at $400,000, you will pay taxes against 40 percent of that value, or $160,000.
However, the state calls out an important exception to the 40 percent assessment value, and Decatur qualifies for it. If the city used a higher assessed value in 1971, the 40 percent limit does not apply.
This means that if your city has been around for a while (like Decatur has) and the city’s assessed values were relatively high in the past (like Decatur’s have been) then the city can set their assessed values above the 40 percent.
Perhaps unsurprisingly Decatur uses a 50 percent assessed value, which was the same value the city used back in 1971.
Decatur’s millage rate is actually fairly low compared to other municipalities in DeKalb, lower even than the millage rate in unincorporated areas of the county. But for city taxes the rate applies to 50 percent of your home’s value rather than the 40 percent elsewhere. If you feel that Decatur’s property taxes are high, this is a big part of why.
For those who geek out on the math, it means the starting value for the municipal portion of Decatur taxes is 25 percent higher than for any other jurisdiction in DeKalb.
Exemptions and Credits
First, credits. DeKalb levies a sales tax called the Homestead Option Sales Tax, or HOST. A large portion of this is used to offset your property taxes. This offset is a direct reduction in the county portion of your taxes based upon the amount of the HOST collected in your jurisdiction.
Now, exemptions. The theory behind exemptions is that not all homeowners use municipal services equally, and if you have less need of a specific municipal service it is reasonable for you to pay less for that service.
The classic example is the senior citizen living on a fixed income. He or she does not have any children in the school system, and so it is unfair to ask this person to pay the same amount as the family with four kids in the public schools. There are general exemptions that reduce the amount of a senior citizen’s property tax bill for the schools.
Note that I said ‘reduce’, not ‘eliminate’. Everyone still pays into the school system, but depending on your circumstance you may pay less. You might be annoyed with this, but please note Decatur is not unique with this approach. It is common across the country.
I highly recommend that you inform yourself on the exemptions available to you and that you take full advantage of what is offered. In many cases the burden is on you to apply for the exemptions.
The Tax Rate
The tax rate is deceptively complex, and it is one of the more difficult items to explain in clear detail. Here goes nothing.
Mathematically, a percent is defined as a part per hundred. If a pot contained a hundred dollars and you took ten of them, you’d have taken ten percent of the pot.
A mill is defined as a part per thousand. Mille means thousand in Latin. If there are a thousand dollars in the pot and you grabbed ten of them, you would have ten mills of the pot.
The millage rate, then, is the part per thousand of your home’s assessed value that you pay in tax. If you live in Decatur, the total 2014 millage rate to the city, county, schools, and state was 43.18 mills.
As we said earlier, no one jurisdiction controls this full amount. The rate includes city taxes, county taxes, school taxes, development authority taxes, and a miniscule portion of state taxes. It breaks down as follows:
|– DeKalb County levies 9.58 mills in Decatur to cover things like county courts, sheriff’s office, etc. The county rates can be different for each municipality in DeKalb depending on the level of support the municipality requires from the county. Decatur’s county taxes are relatively low, since the city covers many of the services that the county provides elsewhere. The county rate is also levied against the 40 percent value of your home, rather than the higher 50 percent that the city uses.||9.58|
|– The City of Decatur levies 13.00 mills, including various city-issued bonds and the Downtown Development Authority. This covers most of the services you see from the city on a daily basis, including police, fire, planning, etc. These are assessed against 50 percent of your home’s value.||13.00|
|– City Schools of Decatur levies 20.5 mills, also at the 50 percent assessed rate of the city.||20.50|
|– Finally, the State of Georgia levies 0.1 mill, mostly to cover the cost of examining the digests in the counties and ensuring everyone is playing fairly.||0.10|
The primary purpose of a tax is to raise revenue. Your property taxes are proportionate to the value of your home, and so the higher the value of your home, the more you pay in tax.
By contrast, a fee acts to recoup the expense of a service from the person who receives that service. It costs roughly the same to pick up trash in front of a small home as it does a large one, thus in most cases the sanitation fee is the same for all property owners.
As with everything else, services and fees vary by jurisdiction.
How this compares
Let’s take the $400,000 home with the basic exemptions and credits available in Decatur and compare its tax bill with homes in other parts of DeKalb County. The HOST credits vary by jurisdiction. If you are interested in running your own analysis, check out this is helpful website for the most basic calculations.
2014 Tax Comparison for a $400,000 Home
|Decatur||Unincorporated DeKalb||Atlanta DeKalb||Dunwoody|
|County and State Taxes||$602.74||$1,540.96||$643.21||$1,059.05|
|Total Tax Bill||$7,620.14||$5,391.01||$5,576.25||$5,350.19|
A couple of things jump out from the table. First and foremost, you’ll note that Decatur has by far the highest total bill. The primary reasons for that are twofold:
– First, as explained before, Decatur assesses the milllage against 50 percent of your home’s value versus 40 percent in the rest of DeKalb. This means that if everything else were equal, the portion of Decatur’s taxes start at a 25 percent higher value than the other jurisdictions.
– Second, the HOST credits are applied only to the DeKalb County portion of the bill. Since the DeKalb portion of a Decatur bill is relatively low, the credit received by Decatur residents is relatively low.
The difference is substantial: on a $400,000 home in 2014, Decatur’s HOST credits amount to just over $850, whereas residents in unincorporated DeKalb receive credits of over $1,670. That’s almost twice the credit received by Decatur residents.
Also note that although the City Schools of Decatur levy the highest taxes of the schools above, they are not the highest by an obscene amount. On a $400,000 home, the City Schools of Decatur are 16 percent more expensive than DeKalb County schools. The difference is a little over $560. Given the difference between a school system that ranks second in the state versus a system where the Governor had to replace most of the school board to avoid losing accreditation, one might view that as a bargain.
Net: For a home of the exact same value, Decatur’s tax bill is over 40 percent higher than unincorporated DeKalb due to the various differences described above.
What this means
Besides the very obvious difference that Decatur homeowners pay more in taxes than some surrounding jurisdictions, what does this mean?
At a basic level, it means that homeowners in Decatur pay a premium price for their government, and have a right to insist on receiving very high quality service in return. It also means they ought to pay close attention to the budget conversation to ensure that the dollars are being spent wisely.
To that end, we’ll tackle the details of Decatur’s next budget and the implications for your taxes in a future column.
Please try to contain your excitement.
Hans Utz has lived in and around Atlanta for 25 years and formerly served as the Deputy COO of the City of Atlanta. He writes about local and national politics. He and his family currently reside in Decatur.