Georgia’s Homestead Tax Exemption: Local Opt-Outs Create a Complex Divide 5   Recently updated !

Georgia’s recent voter-approved Local Option Homestead Property Tax Exemption Amendment, designed to limit property tax assessment increases, has encountered significant resistance from local governments. While intended to provide relief, the amendment, facilitated by H.B. 581, has inadvertently introduced the potential for a bifurcated property tax system. A critical provision allowed localities to opt out, and a substantial number have done so, creating administrative complexity and potentially distorting taxpayer behavior.

Widespread Opt-Outs Signal Local Concerns

Data from the Georgia Secretary of State reveals that 316 local government entities have opted out of the new homestead exemption. This includes:

• 63% of consolidated city-counties
• 30% of counties
• 26% of cities and towns
• 68% of public school districts

Notably, Georgia’s largest urban centers and counties—Fulton, Gwinnett, Cobb, DeKalb, and Chatham—have seen their school systems opt out. Gwinnett and Cobb counties themselves also rejected the exemption. Overall, nearly 65% of Georgia counties, representing 83% of the state’s population, have seen either their county government or school system, or both, opt out.

This widespread rejection, far exceeding initial expectations, prompted the state legislature to pass H.B. 92. This bill allows localities to reverse their opt-out decisions by April 30, 2025, and offers incentives for school systems to rejoin. However, given the strong initial resistance and local government associations’ involvement, a significant reversal is unlikely.

Consequences of a Dual Tax System

H.B. 581 also authorized a local option sales tax increase of up to 1% for property tax relief. Had all localities remained within the new system, the tax landscape, though more complex, would have remained unified. However, the substantial opt-out rate, particularly among major jurisdictions, threatens to create two distinct tax systems within Georgia.

This divergence poses several risks:

• Behavioral Distortion: Differing property tax rules and sales tax rates could influence residential and shopping decisions, undermining tax neutrality.
• Jurisdictional Overlap: Residents in areas like Atlanta, where city and school districts opted out while the county remained, face potentially confusing and drastically different property tax liabilities compared to neighboring areas.
• Increased Complexity: The already complex tax system becomes even more difficult to navigate and understand for the average taxpayer.

A Call for Comprehensive Reform

The significant opt-out rate indicates a fundamental dissatisfaction with the current homestead exemption framework. With H.B. 92 unlikely to reverse this trend, Georgia lawmakers should pursue a more comprehensive property tax reform.

This reform should aim to:

• Establish a uniform system with effective levy limits to control property tax revenue and prevent excessive tax bill increases.
• Address the wide variability in local sales tax rates (2-5%) to reduce cross-border shopping incentives and simplify the sales tax system.

By pursuing a more unified and equitable approach, Georgia can mitigate the unintended consequences of the current homestead exemption and create a more efficient and transparent property tax system.