What HB 581 Means for Georgia: Understanding Amendment 1’s Consequences

Should Voters Vote Yes? Should Governments Opt-Out?

1. Introduction: A Close Look at HB 581 and Amendment 1

As Georgia voters prepare to weigh in on Amendment 1 this November, it’s critical to unpack what’s at stake with House Bill 581 (HB 581). This amendment proposes a floating homestead exemption to limit the increase in property assessments to the rate of inflation. On the surface, this seems like a relief from rising property taxes. But like many seemingly simple solutions, the reality is far more complex and could lead to unintended consequences that harms homeowners, businesses, and local governments alike.

2. Floating Homestead Exemption: A Wolf in Sheep’s Clothing

At the core of Amendment 1 and HB 581 is the floating homestead exemption, which caps how much the assessed value of your home can increase each year, limiting it to the rate of inflation. This sounds like a way to protect homeowners from skyrocketing property taxes. However, the actual impact is much more complicated and unequal.

Let’s break down how it works. The bill establishes a "base year" value—for current homeowners, this will be the home’s 2025 assessed value, which is 40% of its market value. Each year after that, your assessed value can only increase by the inflation percentage, regardless of how much the market value of your home jumps. This capped increase is meant to shield homeowners from higher property tax bills.

However, when you sell your home, the assessed value resets. It's now based on 40% of the new purchase price, meaning the new buyer pays taxes on a much higher value than the previous owner. Here’s where the inequality kicks in.

Consider two homes. You bought House A in 2025 for $250,000. The assessed value would be $100,000 (40% of the purchase price). In 2035, under the inflation cap(assumed to be 3% for this example), your assessed value rises only to $134,391, even if the market value jumps to $500,000. Meanwhile, your neighbor buys House B next door in 2035 for the full market value of $500,000, and that home’s assessed value resets up to $200,000 (40% of the new market value).

Now, both homes are worth the same on the market—$500,000—but the owner of House A pays taxes on an assessed value of $134,391, while the owner of House B pays taxes on an assessed value of $200,000. This creates a significant difference in property taxes for nearly identical homes.

This inequality deepens over time, creating a tax system that punishes new homeowners, who end up shouldering more of the burden while longtime owners benefit from artificially low taxes. As property values rise, this disparity grows, distorting the market and making it harder for new buyers to afford homes, while longtime owners get to keep paying lower taxes indefinitely.

What’s worse, the floating homestead exemption only applies to primary residences. This means businesses, rental properties, and other non-homestead properties face no such cap and must pay based on the full current market value. The burden of rising property values shifts to new buyers, renters, and businesses, distorting the housing market and the tax system even further.

3. The Assessment Limit Falsehood: How HB 581 Fails to Limit Government Spending

One of the most glaring shortcomings of HB 581 is that it does nothing to curb local government spending. While the bill limits how much a property’s assessed value can increase, it places no restrictions on how much local governments can collect in revenue nor does it limit the millage rate.

Here’s the deal: the millage rate is what local governments use to turn your home’s assessed value into a tax bill. So even if your home’s assessment is capped, your taxes can still rise if the local government increases the millage rate. Historically, when assessments have been lower, millage rates have skyrocketed. Back when property values were self-assessed in Georgia, millage rates could soar past 50 mills (that’s $50 for every $1,000 of assessed value). If you think local governments won’t go back to those levels, think again.

Let’s look at a typical scenario. A local government needs $10 million to fund its services—schools, fire departments, police, you name it. But thanks to the floating exemption, assessments on many residential properties don’t increase as fast as market values. So, what’s a county to do? Simple: bump up the millage rate to make sure they still collect that $10 million.

This is the ultimate trap for taxpayers. The floating homestead exemption gives the illusion of tax relief, but in reality, it only shifts the burden to millage rate increases and other forms of taxation. Local governments will still need to fund essential services, and when property tax revenue doesn’t keep pace, they’ll turn to millage rate hikes, sales taxes, and other fees to fill the gap.

The fact that HB 581 does nothing to limit government spending is a fatal flaw. Without real restrictions on revenue growth, local governments will continue to find ways to raise taxes, leaving homeowners with little real relief in the long run.

4. The Backdoor to Your Wallet

When local governments are squeezed by assessment limits, they often turn to “creative” revenue solutions. If you thought the floating homestead exemption would limit how much they can tax you, think again. One of the most common workarounds is the creation of special tax districts—geographic areas where additional taxes are imposed for specific services like public safety, road maintenance, or infrastructure improvements.

These districts allow local governments to raise money without officially increasing property taxes. But here’s the kicker: they create a patchwork of uneven tax burdens that’s tough for the average homeowner to navigate. You might end up paying more for fire protection or road repairs just because you live in a certain neighborhood, while someone across town doesn’t. Over time, these special districts can proliferate, leading to a complex web of taxes and fees that are nearly impossible to keep track of.

Take Walker County, for example. A few years ago, they introduced a “public safety fee” based on the square footage of your home. This fee was separate from property taxes but still a mandatory charge meant to fund fire and rescue services. So, even if your property tax bill seemed reasonable, that extra fee added up, proving that local governments will always find a way to get their hands on your money.

But it doesn’t stop with special districts. When property taxes aren’t enough, local governments often introduce new fees for services that used to be covered by your taxes. Trash collection? That’s now a separate fee. Stormwater management? Another fee. Public safety? Yup, that’ll cost you extra, too. These fees are often regressive, hitting lower-income households the hardest.

6. The FLOST Provision: Local Tax Hikes in Disguise

One of the most complex, yet significant, aspects of House Bill 581 is the Floating Local Option Sales Tax (FLOST) provision. This element of the bill introduces a new sales tax, meant to provide property tax relief. However, as studies and historical data suggest, the outcomes of such tax shifts may be far from beneficial for taxpayers, particularly lower-income families, and small businesses.

The premise behind FLOST is that local governments, facing revenue shortfalls due to the capped increases on property assessments (from the floating homestead exemption), will now have the option to impose an additional local sales tax to offset the reduction in property tax revenue. While this may seem like a reasonable way to maintain government funding, the reality is that it places an additional burden on consumers—especially those who can least afford it.

Sales taxes are inherently regressive, meaning that lower-income families pay a higher percentage of their income on basic goods and services. In communities where FLOST is adopted, residents may see their property taxes stagnate or slightly decrease, but these benefits will be outweighed by higher sales taxes on everyday items like groceries, clothing, and other essentials.

This tax shift unfairly impacts Georgia's working families. For example, a 1% increase in sales tax may seem small, but for families living paycheck to paycheck, this represents a significant increase in their cost of living. Meanwhile, the actual benefits of the property tax relief might primarily accrue to long-term homeowners, leaving new homeowners, renters, and business owners to shoulder the heavier load through sales taxes. Over time, the effect of these sales taxes can quietly accumulate, leading to an increased overall tax burden without the transparency typically associated with property tax hikes.

As numerous studies on the long-term effects of Georgia’s Local Option Sales Taxes (LOST) suggests, these sales tax measures may offer short-term relief but fail to deliver sustainable, long-term property tax reductions. The study highlights how local governments often use the proceeds from these taxes for additional spending rather than long-term tax relief. In fact, much of the revenue generated from sales taxes is often used for general purposes, allowing governments to continue increasing their spending while offering only modest, if any, real reductions in property taxes​.

The experience with Georgia's existing LOST should serve as a warning. While initially intended to reduce property taxes, this sales tax has been and is being used as additional revenue sources, allowing local governments to expand spending while taxpayers pay more overall. This pattern of behavior will likely be repeated under the FLOST provision in HB 581, leading to higher costs for Georgia residents without the promised relief.

7. A Tale of Two Counties

The impact of HB 581 won’t be felt the same way across Georgia. Take Catoosa and Chattooga counties as prime examples of how the bill’s effects will vary.

Catoosa, with its rural charm and proximity to Chattanooga, has experienced steady growth in recent years. The floating homestead exemption could make an already competitive housing market even more cutthroat. Longtime homeowners, shielded by the exemption, have little incentive to sell, holding on to their homes for decades to keep enjoying low taxes. But with a steady stream of newcomers looking to move in, the market tightens, driving prices even higher.

The result? Developers scramble to meet demand by converting farmland into housing developments, eroding the very rural charm that drew people to Catoosa in the first place. What started as a way to protect homeowners from rising property taxes could end up fueling the kind of overdevelopment that long-term residents despise.

Over in Chattooga County, things look different. As a more rural, economically depressed area, Chattooga isn’t experiencing the same population growth as Catoosa. But the floating exemption still has a distorting effect. Longtime residents see their property taxes remain low, while younger buyers face higher tax bills for similar homes. And without new residents to expand the tax base, Chattooga’s local government faces stagnating revenues, making it harder to fund schools and services.

In both counties, HB 581 creates a two-tiered housing market. Long-term homeowners enjoy artificially low taxes, while newcomers face higher costs. This doesn’t just hurt the housing market—it reduces economic mobility, making it harder for young families to put down roots and build wealth.

8. Proposition 13 and HB 581: A Cautionary Tale from California

Georgia voters need only look at California’s Proposition 13 to see the future consequences of passing Amendment 1 and allowing HB 581 to take effect. Proposition 13, passed in 1978, capped property tax assessments at 2% per year, regardless of the actual rise in market value. Like HB 581, it was presented as a way to protect homeowners from rising taxes, but its long-term effects have distorted California’s housing market and severely impacted local governments.

Under Proposition 13, longtime homeowners enjoy drastically lower taxes compared to their newer neighbors, who are taxed based on the current market value of their homes. This has created a two-tiered tax system, where newer homeowners shoulder a much larger portion of the tax burden. The result? Housing prices skyrocketed, long-term homeowners became incentivized to stay in place, and newer buyers were pushed to the edges of affordability. The incentive to hold onto properties and the tax benefits of low assessments have discouraged the selling of homes, creating a housing supply shortage.

Similarly, businesses and commercial properties in California have borne the brunt of the tax burden, as they’re not protected by Proposition 13. This has led to increased costs for businesses, higher rents for commercial tenants, and fewer economic opportunities overall. The unintended consequence of Proposition 13 has been the erosion of California’s business climate and a loss of competitive edge.

Local governments in California have resorted to introducing various fees and special assessments to make up for lost property tax revenue. The promised relief of Proposition 13 has, over time, turned into a fiscal strait jacket for California.

HB 581 sets Georgia on a similar path. While the initial appeal of property tax caps may seem like a win for homeowners, the long-term consequences will mirror those seen in California: unfair tax burdens, distorted housing markets, and underfunded public services. Georgia voters should take note of California’s experience before embracing a policy that offers short-term relief at the cost of long-term damage.

9. For School Districts, This Is a Nightmare

School districts are particularly vulnerable under HB 581, which caps property assessments but does nothing to limit the growth in the cost of providing essential services. Unlike other local governments, school districts in Georgia face a 20-mill cap on property tax rates, severely restricting their ability to raise additional revenue through millage rate increases. This is where the floating homestead exemption hits the hardest: when school districts are already at or near the millage limit, their ability to generate new revenue to meet rising costs is effectively blocked.

The millage cap combines with the floating homestead exemption to create a serious problem for school districts. As property values increase in the real estate market, the assessed values that drive school funding are kept artificially low by the exemption. This means that while the cost of educating students continues to rise, school districts have limited ability to increase the tax base to cover those costs.

For example, if a school district has already maxed out its 20-mill limit, any additional growth in its revenue must come from an increase in the assessed value of properties within the district. However, with the floating homestead exemption in place, these assessments are capped at the rate of inflation. This creates a funding gap, forcing school districts to either cut services, reduce staff, or implement new fees for activities that were once free.

The financial strain on schools won’t be felt equally across Georgia. Rural and low-income school districts, which rely heavily on property taxes for funding, will be hit especially hard. These districts are already dealing with limited tax bases and a smaller pool of property to tax. With the floating homestead exemption, these districts will struggle even more to meet their financial needs.

The result? Georgia’s commitment to quality public education is at risk, and the floating homestead exemption will only exacerbate the problem.

11. A Call to Action for Smarter Tax Reform

As Amendment 1 approaches, it’s crucial for Georgia voters to understand the potential damage HB 581 could cause. While the bill may offer short-term relief for some homeowners, its long-term consequences are clear: a deeply unfair tax system that shifts the burden to new homeowners, renters, and small businesses.

The Association of County Commissioners of Georgia (ACCG) and the Georgia Municipal Association (GMA) rightly point out that local governments can opt-out of this flawed exemption and instead request their local delegations to pursue a customized homestead exemption that suits their communities better. This is far and away the most sensible path for local governments to take if Amendment 1 passes this November—which, due to deceptive ballot language, it very likely will.

But make no mistake: Amendment 1 and HB 581 is not the solution Georgia needs. While it acknowledges the problem of rising property taxes, it offers an incomplete and reckless fix that ignores the deeper issue of government spending and will cause generational damage if enacted. We should be addressing the root causes of rising taxes through thoughtful, equitable reform that balances the needs of homeowners, businesses, and local governments alike. Georgia can do better than a stopgap measure that only pushes the problem down the road, creating more harm than good.

As California’s experience with Proposition 13 has shown, assessment limits like these only serve to exacerbate problems, disrupt local economies, and make the state worse. Georgia deserves a tax system that is fair, transparent, and sustainable. Rather than locking the state into a future of fiscal irresponsibility and tax inequity, Georgia lawmakers should focus on crafting real, sustainable reforms that spread the tax burden fairly and responsibly across all groups.

In short, Georgia voters must see through the mirage of Amendment 1 of HB 581. We need real reform, not a temporary band-aid that will result in long-term fiscal damage. It’s time to reject Amendment 1 and push for a tax system that truly works for everyone—not just a select few.