Perdue: Tax relief grants fail to help homeowners

The state's $428 million homeowner tax relief grant program has done little more than supplement the growing spending habits of local government, Gov. Sonny Perdue said Tuesday.

Perdue, who has already frozen the grant payments to counties because of the state's budget crisis, said the program has proven ineffective in holding down property taxes in Georgia

"The growth of local government has been overwhelming," Perdue said. "While the [grant program] had great motives initially - to reduce the local tax burden - it has not worked out that way."

Perdue and lawmakers have been at odds over whether to stall the homeowner grants as they look for ways to cut the budget. With tax collections down in the slow economy, state officials are looking to cut at least $1.6 billion in spending.

Perdue sounded Tuesday as if he'd like to eliminate the grants permanently.

The way the program works, the state sends the grant money to counties. The counties then pass it along to homeowners in the form of credits on their property tax bills.

Lawmakers, who face re-election this fall, object to cutting the grants. They fear local governments will raise property taxes to make up for the loss of state revenue - and that local officials will then blame the state for the tax increase. Other officials said homeowners simply can't afford the higher taxes that may come if the program ends.

"Our position will remain the same on the Homeowners Tax Relief Grant: We need to keep this grant intact so that Georgia's homeowners are not affected any further in this current economy," said Lt. Gov. Casey Cagle, a likely candidate for governor in 2010.

Perdue is in the middle of his second term as governor and can't run for re-election again. Unlike Cagle and lawmakers, he can politically afford to take what may be a less-than-popular stance of eliminating a taxpayer relief program begun by his predecessor, Roy Barnes.

While the state is making spending cuts, Perdue said local governments "have never approached it from the standpoint that they have to tighten their belts."

The governor acknowledged that cutting the program would be difficult for lawmakers to swallow.

"This is politically nuclear for legislators and policymakers and people who want to be elected to office," he said. "But it's the facts, it's true. I will defy anyone to refute the statement that it's been ineffective in helping to lower property taxes.

"It has been a supplement to local governments. They've taken their tax revenues plus the [grants] and continue to grow their governments."

State lawmakers have long complained about the growth in local government spending and property taxes.

According to Department of Revenue figures released by Perdue's office Tuesday, local government revenue from sales and property taxes jumped to $1,519 per capita in fiscal 2008 from $1,094 in fiscal 2000. State revenue from those sources increased during that period from $601 to $625 per capita.

However, the DOR numbers don't include what the state gets from income taxes, a major source of revenue. And other studies have shown a smaller gap between the growth in local and state spending.

Clint Mueller, a lobbyist for the Association County Commissioners of Georgia, said counties have been passing the entire relief grant along to homeowners in the form of a credit on tax bills.

"There is no way we can stick that money in our budget without giving it to taxpayers," he said.

Mueller added, "I don't think our spending has been out of line."

Perdue met with Republican lawmakers over the weekend. And legislative leaders met with him Monday to suggest a plan that would avoid eliminating the homeowner relief grants.

House Rules Chairman Earl Ehrhart (R-Powder Springs) said Perdue is right about the growth of local government spending. And, like Perdue, he said that the homeowner relief grants may not be the best way to deliver property tax cuts.

House Speaker Glenn Richardson (R-Hiram), for instance, spent last year promoting a plan to replace all property taxes with an expanded sales tax. His plan didn't go anywhere during the 2008 session.

Ehrhart said he would support an alternative to the homeowner relief grant program as long as it cut property taxes.

"He [Perdue] understands clearly the House and the Senate, and the basic Republican philosophy that you don't get rid of tax relief in down times because all that does is depress the economy, and you get less money flowing into the government," Ehrhart said.

"I am unequivocally against getting rid of the tax relief."

Democratic lawmakers expressed similar sentiment.

"Removing the property tax cut for Georgians is a non-starter from the Democratic side," said Sen. Kasim Reed (D-Atlanta).