At Leona Helmsley’s trial on charges of tax evasion in 1989, her housekeeper testified the former hotel magnate haughtily claimed that, “only the little people pay taxes.” Thanks to action by soon-to-be ex-Gov. Sonny Perdue, and many of his colleagues in the Georgia General Assembly, many of us “little people” likely will be hit with higher taxes.
In June, Perdue signed legislation creating the mis-named “Special Council on Tax Reform and Fairness for Georgians,” an 11-member group that has been traveling the state, meeting with everyone from special interest groups looking to preserve tax exemptions carved out for them, to concerned citizens hit hard by ever-increasing tax burdens.
The council and its work should be viewed skeptically by citizens of the Peach State; especially given Perdue’s record for raising taxes. Shortly after his inauguration in 2003, for example, Perdue proposed a $762 million tax increase. The Governor had to choose between tough spending cuts and raising revenue to plug the deficit hole. Expediency won out and taxes went up.
Unfortunately, history appears ready to repeat itself; as the tax “reform” council reportedly is considering new taxes on services such as dry cleaning and hair cuts, as well as the always easy, “sin tax” hikes.
A tax hike on tobacco has been bantered about during the past few sessions of the state legislature. Groups and politicians supportive of the effort wore “pass the buck” buttons in the halls of the Capitol, pushing for an increase in Georgia’s cigarette tax from 37 cents to $1.37 per pack.
Both candidates for governor this year – Democrat Roy Barnes and Republican Nathan Deal – have indicated that they would be open to a cigarette tax hike. To Deal, the tax is palatable because it “is one of the areas where there is more public acceptance.” That may be true, but what is popular with the masses may not always be sound policy.
The claims made to justify these tax hikes range from a desire to deter smoking, particularly among youth, to increasing revenues.
Invoking the “it’s for the children” rhetoric in any public crusade attracts support, but whether or not cigarette taxes deter youth from smoking is not clear. According to the Tax Foundation, a non-partisan think tank, young people are just as likely to buy a pack of cigarettes after as before a tax hike.
During these tough economic times, politicians have justified increasing cigarette taxes to offset falling revenues. It may sound like a good idea, but within the last two years, four states and the District of Columbia have increased the tax on tobacco, to decidedly mixed results.
When the legislatures in New York and New Jersey increased taxes on tobacco, residents traveled across states lines to Pennsylvania to purchase cheaper packs. Florida and Maryland both saw a significant drop in sales with the passage of cigarette tax hikes. After a fifty cent increase on cigarettes in 2009, the District of Columbia expected to take in less revenue from cigarette taxes than the previous fiscal year.
If the dollar tax hike is passed in Georgia, many smokers will simply cross state lines to any one of the four states bordering us that have a lower cigarette tax. Lost revenues would be made up from either spending cuts or . . . more tax hikes.
The tax council is due to present a list of recommendations next January, just as the new session of the state legislature is beginning and as a new governor is sworn in. While Georgia certainly is in need of a fairer tax system, the next governor and members of the General Assembly should be made to understand that hiking taxes hardly qualifies as “tax reform.” Demonizing a particular segment of society may make politicians and nanny-state advocates feel good, but it is anything but a panacea for the state’s fiscal problems.