Georgia's House Bill 581: A Double-Edged Sword for Taxpayers and Local Governments

     Georgia's House Bill 581 (HB 581), also known as the "Save Our Homes Act," has sparked a heated debate between taxpayers and local governments since its passage in April 2024. The bill, which took effect on January 1, 2025, introduces significant changes to property tax regulations and creates a new local option sales tax, aiming to provide relief for homeowners while potentially impacting local government revenues.

     The cornerstone of HB 581 is the statewide floating homestead exemption, which caps annual increases in property tax assessments on homesteaded properties. This measure is designed to protect homeowners from sudden spikes in property taxes due to rising home values. For example, a homeowner in Gwinnett County with a property valued at $400,000 could save approximately $10 per month in property taxes under the new system. The bill also introduces a new local option sales tax, known as the Flexible Local Option Sales Tax (FLOST), which can be used specifically for property tax relief. This additional revenue stream could potentially lead to further reductions in property taxes for homeowners.

Despite the apparent benefits for taxpayers, many local governments are considering opting out of the HB 581 provisions. Here are some key reasons:

1. Reduced Revenue: The cap on property tax increases could significantly limit the funds available for schools and other essential services6. This reduction in revenue may force local governments to cut programs or seek alternative funding sources.
2. Long-term Fiscal Planning: HB 581 disrupts long-term fiscal planning for school systems and local governments. Property taxes are a significant funding source for schools, covering teacher salaries and other essential services.
3. Existing Exemptions: Some jurisdictions, like Gwinnett County, already have value offset exemptions (VOE) in place that may provide better protection for homeowners than the new statewide exemption.
4. Local Control: The bill takes away local control over tax policies, removing decision-making processes from current and future locally elected officials.
5. Unintended Consequences: There are concerns about potential unintended consequences in the housing market and on millage rates.

     Local governments face a tight deadline to make their decision. Those choosing to opt out must hold three public hearings, pass a resolution, and submit it to the Secretary of State's office by March 1, 2025. This process has led to intense discussions in many communities, with some officials viewing opting out as "voter nullification" since the bill was approved by a majority of voters in a statewide referendum. As the March 1 deadline approaches, local governments across Georgia are carefully weighing the potential benefits for taxpayers against the long-term financial implications for their communities. The outcome of these decisions will shape the future of property taxation and local government funding in the state for years to come.