DeKalb County is a large county in metropolitan Atlanta, GA. In an effort to relieve the tax burden on homeowners and promote homeownership, the county commission is considering a measure that would allow the county to exempt all owner-occupied properties from the property tax by offering a 100% property tax homestead exemption on the assessed value of the home (assume no homestead exemption is currently in place) effective January 1, 2022. And while owner-occupied housing will be exempt from all county property taxes, commercial, industrial, and rental properties will continue to pay property taxes at the current property tax rates. Other property taxing jurisdictions within DeKalb County, including the school districts, fire districts, special districts, etc., would continue to levy taxes on all properties (i.e., owner-occupied, commercial, industrial, and rental properties). Reassessment of properties is generally a responsibility of the county assessor’s office; however, the state of Georgia mandates county governments to reassess all properties every five years. The DeKalb County assessor’s office does not expect to reassess its properties until 2023.

Currently, all counties in metro Atlanta have the same sales tax rate (6%), and DeKalb County is the only one that plans to raise its sales tax rate to offset lost revenues from the 100% homestead exemption on owner-occupied homes (it is also the only one that currently has the legal authority to do so). Food is the only retail item exempted from sales taxes. Based on last year’s sales and property tax revenues, the county commission has estimated that the additional sales tax revenue from a 1.5 percentage point increase (rate increase from 6% to 7.5%) should be sufficient to cover the foregone property tax revenue.

You are an aide to the county’s Chief Executive Officer, and he has asked for your complete analysis of this proposal. Using the tax evaluation criteria (efficiency, equity, adequacy/elasticity/stability, and administration/feasibility), evaluate the strengths and weaknesses of this proposal compared to not making a change (i.e., no homestead exemption and no increase in sales tax rate).