By Jeffrey H. Dorfman www.ajc.com
Georgia has more than 500 cities. It would seem that we don't need more local governments, yet that is just what we are getting. Fulton County has added four cities (Sandy Springs, Johns Creek, Milton and Chattahoochee Hill Country) in the past few years. There has been talk of a new city in DeKalb. There is even talk of splitting Fulton County in two (by bringing Milton County back). Additionally, there was recent discussion of the Buckhead area of Atlanta becoming a city.
When these new cities are proposed, there is much discussion about the economic consequences. Some effort is spent to answer the question "Will the new city be economically viable?" However, much more effort is usually spent on the horrible economic damage that will be done to an existing local government.
When a county or city advances the argument that the formation of a new city will cause economic hardship to the existing government, resulting in service cutbacks or tax increases, it is admitting to overcharging the area considering forming a new city. Atlanta doesn't want Buckhead to leave because Buckhead residents pay far more in taxes and fees than the value of city services received. Sandy Springs, Milton and Johns Creek were all similar cases.
Citizens pushing for new cities sometimes talk about local control, different zoning policies or other customer-service-type issues, but these are window dressing. Cities are forming because their would-be residents are being overcharged by their current service provider(s).
There is no single definition of "fair taxation." However, the national consensus is that the federal government should be funded by a progressive tax system based on one's ability to pay. State government funding is generally less progressive, but still somewhat weighted in that direction. We do not appear to have a similar consensus that city and county governments should be funded based on "ability to pay," with many people favoring paying based on services received.
Cities and counties in Georgia typically get 30 percent to 50 percent of their revenues from property taxes, and that means the owners of more expensive houses are paying more taxes.
Since it is rarely more expensive to provide services to those more expensive houses, local government collects a surplus from them and uses it to offset the shortfall from owners of less expensive properties. (Businesses also generate a surplus for local governments.)
Some will feel that city and county governments should be trying to charge their citizens an amount equaling services received, which they generally do for some services, such as trash, water and sewer. Others will think the current system is fair, with wealthier citizens bearing a heavier burden. Who is right doesn't matter (it's both, since these are opinions). What counts is that there are large numbers of people and neighborhoods that can have lower taxes by forming their own city.
We might try solutions such as a property tax cap, more reliance on sales taxes or more reliance on user fees and charges for services.
In the meantime, as long as we have a system where taxes are not tied to services received in a manner that people deem fair, new cities will continue to become reality.
> Jeffrey H. Dorfman is a professor of agricultural and applied economics at the University of Georgia.