Within days of his inauguration in 2003, Gov. Sonny Perdue proposed a hefty tax hike on Georgians instead of pushing the legislature to make tough choices on spending. Unfortunately, his legacy could be yet another tax hike if the legislature passes recommendations proposed by the so-called “Special Council on Tax Reform and Fairness for Georgians.”
We all know the story, legislators are facing another budget shortfall – estimated to be just south of $2 billion. Unlike the previous two years, appropriators this year are not going to be able to rely on stimulus funds to soften the blow of declining tax revenues. And because of excessive spending during good years, budget cuts have been more difficult than they should have been. The long hangover spawned by free-wheeling spending during Georgia’s boom years continues to strengthen its hold on the Peach State.
The proposal released last Friday by the “tax council” calls for eliminating many sales tax exemptions Georgians currently enjoy. Among the recommendations are eliminating the income tax exemptions and deductions, eliminating the sales tax exemption on groceries, new taxes on “causal sales” of automobiles, and imposing new taxes personal services – including purchases of books and music off the internet would be taxed.
The council also recommends increasing the excise tax on tobacco to the “average of the surrounding states” – from 37 cents to 68 cents per pack. Of course, the “average of the surrounding states” skews the tax, considering that Florida’s tobacco tax, currently at $1.34 per pack, is significantly higher than any other state that borders Georgia. The next highest in the region is Tennessee, at 62 cent per pack. Smokers continue to be a target for Georgia legislators.
At the height of the recession in 2009, there was some discussion in the legislature about eliminating the sales tax exemption on groceries. While no official estimate was ever given, a report from the Associated Press noted that this tax hike would “raise close to $1 billion a year.” However, the tax council anticipates that removing this exemption would increase taxes by $472 million – the largest single tax increase included in the council’s recommendations.
Georgia’s personal and corporate income tax would also be reformed under the recommendations. The council calls for reducing and minimizing deductions, and gradually reducing the state’s personal income tax from 6 percent to a flat 4 percent rate by January 2014. The corporate income tax rate would reflect the personal income tax rate.
If providing the state a “fairer” tax system means taxing nearly every aspect of our lives – from purchases at the grocery store or on the internet to buying a neighbor’s used car, then the Special Council on Tax Reform and Fairness for Georgians certainly hit the mark.
On Monday, Americans for Tax Reform, an organization led by Grover Norquist that promotes less taxes and is famous for the Taxpayer Protection Pledge, announced its opposition to the proposal noting that the “income tax reductions amount to roughly $750 million in savings for Georgians, but tax increases on groceries, tobacco, communications services, the Internet and other services approach $2 billion.”
Broadening the sales tax base by removing exemptions is not necessarily a bad idea. Most economists agree that having a broad tax base is sound public policy. But if the Republican-dominated General Assembly wants to take that approach, there must be corresponding tax cuts in other areas to ensure that any proposal is revenue neutral – not a massive, billion dollar tax hike, which is exactly what the council is proposing.
At least at this point, one would have to consider the council’s report a disappointment.
- by Bob Barr, The Barr Code