Taxes to go up for Georgians?

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

57 comments Add your comment

Captain DaPoet

January 12th, 2011
6:37 am

Just as relief spells Rolaids Republican spells DEMOCRAT!

Nor am I surprised to see Nathan Deal {who claimed to be a real conservative on the billboard I pass every day on my way to work in the morning during the election} that in regards to fiscal responsibility his claim to being a real conservative is a lie; while in regards to being a sycophant for corporate interest his claim to being a real conservative is absolutely true.

HDB

January 12th, 2011
7:42 am

It’s also noteworthy that Republicans in this state desire to pass a more regressive tax structure that would adversely affect the poor and retired by increasing taxes on items needed for subsistence (groceries) and communications (telephone)…..rather than passing a more progressive tax structure that does NOT adversely affect the wealthy since they have more disposable income!!

And one wonders why people don’t see what’s going on!!!

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Greg in the Highlands

January 12th, 2011
8:10 am

Rather than tax the items necessary to survive (groceries, electricity, natural gas, etc), why not go after those that are the extras. The 22″ rims, high power stereos, $200 jeans, hair weaves, 60″ flat screen TV’s, cable TV and all the other unneeded luxuries should be taxed accordingly. Yes, I’m speaking of VAT. Establish a threshold for everyday items and tax items above that limit. The only people affected will be those that choose to purchase these items. Areas of spending to cut include bonuses to anyone in public service, eliminate 50% of state owned passenger vehicles, and establish a limit on state salaries (those truly interested interested in public service would not have a problem with this provision). The most wasteful are the “double dippers”. If you collect a pension from one state employer, you cannot work for another state agency- you are retired- period.

Eric

January 12th, 2011
8:12 am

Right on! Thanks for reporting “the way things are.” All these new tax increases, especially on groceries and the Internet, are incredibly heart-breaking. Theft and robbery by any other name!

jt

January 12th, 2011
8:13 am

Why is news?

Republicans ALWAYS raise taxes and increase the size of Government. They are just a little bit more sneakier than Democrats.

Georgians deserve who they vote for.

carlosgvv

January 12th, 2011
8:27 am

If you are a Republican Governor it is far easier to raise taxes on the people than on Corporations since you and your party are totally dependent on them for funding your campaigns. So, once again it will be Big Business yes, people no.

Tracy

January 12th, 2011
8:52 am

Georgia elects the person who comes across as the most religious and the most social right winged. Then they call that a “conservative”. As long as they keep up the social-right agenda, the bulk of the voters totally ignore the fact they’re jacking up taxes and increasing government size.

This is a pattern across the Nation in many regions that seemed to begin with Reagan. He ran a very “Religious Social-Right Equals Conservative” campaign and it’s stuck with us ever since.

In the long term big picture, Republicans using this tactic has resulted in one fact. There are no “conservatives” anymore. They preach fiscal right during the election, but the second they get elected it’s spend and growth time.

Nathan Deal is going to wreck our State. Even if the national economy starts to recover, Georgia will lag far behing in recovery due to him. He was by far the worst of the GOP candidates we had, but of course he won due to his “social right” ads, accusing everyone else of not being social right enough.

You bought the lie Georgia, you followed to false prophet. Now we’ll all pay the price.

Thanks.

VietVet

January 12th, 2011
9:00 am

The average white Georgian votes for a party (R) over his/her own economic interests. Their incomes and wealth have consistently languished or fell over the last 30 years. The winners are politically favored large corporations, special interests, people who inherited wealth, and the richest 2%. And the worse things get for the average voter, the more they blame others. My advise – get even, get wealthy or get used to life on the way down.

frank spivey

January 12th, 2011
9:20 am

TAX HIKE!!!!!!!! What else is new. Why can’t the news and politicians tell the real truth. I see where tax on food will effect the poor. Maybe it is time to effect the poor. They are the reason we are in a shortfall. They cost the state more than any other class of people but pay hardly nothing. Crime, and Welfare in all forms is something that we can’t afford to keep paying at our current rates. I saw where a single mother of 2 making minimum wage, after all the government handouts she can receive , can take home $4000.00 more dollars a year than a single mother of 2 making $60,000 a year. and they left out the biggest handout. it is becoming popular to put the 2 children in foster care, the single mother’s mother aplies to be a foster parent, thus they get $1500 a month to keep their own grandchildren? Fair isn’t it. The poor. If you can’t afford children don’t have them.
I know a man that owns a business. Hired a girl, single mother. She goes to Department of Family and Childrens Services(dfacts) to apply for child care so she can work. She was told that because she was working they could not tell her how long it would take to get anything for child care. But if she would quit her job she could get help in a matter of days. If she quits her job she does not need the child care help. As long as we pay people not to work we will continue to have a budget shortfall.
This does not take in how much the poor that are commiting crimes costs the State every year.

DannyX

January 12th, 2011
9:28 am

This is not surprising at all.

Republicans in Georgia know how to play the game. Republicans spent 2 years in a total frenzy claiming Obama was going to raise every ones taxes. Georgia ate that red meat up.

Funny thing though. While Georgians were feasting on Obama meat, Republicans here in Georgia were the ones raising taxes. The middle class got hit hard when Georgia Republicans voted to end the state property tax exemption. I have already paid $600 more because of it.

Now the middle class is about to take another hit thanks to Georgia Republicans. This on top of all of the over the top Georgia Power give-a-ways.

Obama is going to raise your taxes. LMAO, the people will eat that up.

David Z

January 12th, 2011
9:31 am

I think the assertion that a good tax reform needs to be revenue neutral is incorrect. Better to say that a good tax reform needs to be integrated wtih spending reform.

Without such integration, the suggestion that tax increases have to be offest by tax reductions elwsewhere will automatically kill any chance for a flat or fair tax. Because government would still be in the business of picking winners and losers.

Therefore, let’s call on the conniver-in-chief to table this “deal” until his spending plan can be brought to light. We shouldn’t allow him to blame the tax reform on his predecessor and give him room to spend in the dark.

Trapped in a Red state

January 12th, 2011
9:58 am

Bob

Ok, now I get it….the Tax Council which is intended to provide an impartial opinion regarding how to best address of state budget woes…now…. because they didn’t fall ‘lock-step’ with YOUR opinion as to the best approaches for a balanced budget…are bogus. What hypocrisy…
These sales tax exemptions should never have happened, for one. Now that they face repeal , you and Mr wonderful..Grover Norquest whose famous line states ” he would shrink the size of Government to the size that it can be drowned in a bathtub”, call it a tax increase…
Is there ANY reasonable level Governemt which you and good old Grover think is appropriate…other than…NONE !!!

Jefferson

January 12th, 2011
10:09 am

Well heeled Georgians should be paying about 10%, it time GA income tax becomes progressive. Stop giving the breaks to those who don’t need them.

Trapped in a Red state

January 12th, 2011
10:39 am

Do you bloggers realize that the sales tax exemption on groceries does not include your counties additional 1 to 4% local, special, educational or MARTA taxes. Never has included them…just the 4 % ’state tax’. You local governments have the best of both worlds…funding for your local projects via these ‘local taxes’ and still complain that this will be a tax increase to repeal the state portion of the tax, inspire of the fact that without them , we face draconian Additional cuts in education, transportation, etc. Now, what would you call yourselves…maybe hypocrites ???

Old Mechanic

January 12th, 2011
11:02 am

I think that the people of Georgia need to wake up quickly and protest this travesty. They call it fairness! I guess it depends which side you are on. If you are a business or high income earner, you might consider it fair to tax mid and low income people at a higher rate. The taxes proposed comprise a larger percentage of their (mid to low income people) income than the higher income people. They say that the plan is (Revenue Neutral). This is code for cut my tax and tax the little guy more. I am neither a Democrat or Republican, but I do vote and I can assure you that I will not vote for any politician who goes along with this plan. I have watched our state over the last 40 years go from being a great place to live to being a place where the politicians try to take the peoples money any way they can so they can waste it on their petty projects.

Halftrack

January 12th, 2011
11:11 am

Please advise “Real Deal” and our Legislature to look at NJ and Gov. Christie to find a solution. Illinois just passed a 66% tax hike. Many ” Yankees ” are about to move somewhere else.

Darwin

January 12th, 2011
11:31 am

Isn’t this flat tax light? I thought that’s what everyone wants?

margie smith

January 12th, 2011
12:08 pm

Well maybe you republicans will see how not so wonderful the republican party is, How in the world can people keep paying more and more taxes and the new tax they are talking about will be on everything. Talk about hurting business, people will only have money to pay taxes, food, gas, clothes, water everything will end up costing more. How can you back up this kind of logic. I thought republicans said if we keep more of our money we will be able to save and buy more. What happen another lie again when will the public wake-up. How about it tea party stop this tax. What a lie.

Swede Atlanta

January 12th, 2011
12:10 pm

Was the commission’s charter to reform the tax system but keep it revenue neutral? I don’t really know.

Given the budget deficit and the persistently high unemployment rate I would think the council would have had three objectives
1. Recommendations for reforms to the tax code that would ensure Georgia was perceived as a “good place to do business” in order to attract and retain employers
2. Recommendations for reforms to make the tax system fairer and simpler
3. Recommendations that could provide additional sources of revenue

The GA has already slashed, sliced and diced the budget. I’m sure there are a few areas that could be further cut but at some point you get to bare bone and further cuts undermine public safety and essential services.

We are going to need to find additional sources of revenue. That can be by kickstarting the economy and generating more revenue as a result of consumer buying and more people working. Or we need to find ways to collect more from existing taxpayers.

Common Man

January 12th, 2011
12:21 pm

Why doesn’t everyone just give all of their earnings to the government (Fed & State) and they can give each person an allowance. Even then, the legislators would still find a way to run up a deficit. At some point, there has to be serious cuts in spending at the national and state levels or we are all going ot be taxed into oblivion. It doesn’t matter what party is in charge. They exist unto themselves.

Swede Atlanta

January 12th, 2011
12:30 pm

Common Man

U.S. taxpayers have among the lowest taxes among developed countries and among the least services except for an out of control military expenditure.

Georgians are somewhere in the middle of the pack when you add in all the various taxes and fees.

I don’t disagree that all taxes should be subject to a careful review and that government spending needs to be carefully tailored. But you can only cut so much from education, transportation, public safety. At some point you have to realize that it costs money to provide those services and must be prepared to cover those costs through appropriate taxation.

OakhurstDawg

January 12th, 2011
12:30 pm

Oh John,
It’s all so easy when you don’t have any real responsibilities. I mean really…what’s your legacy? Whining about taxes and using statistical anomalies to make broad conclusions?

Hillbilly Deluxe

January 12th, 2011
12:32 pm

new taxes on “causal sales” of automobiles,

Zell Miller did that and it went over like a fart in church. Of course, when he was forced to get it repealed, he proclaimed himself the saviour of the little man for getting rid of it. Good ol’ Zig Zag.

q

January 12th, 2011
12:37 pm

Become self sufficient, wind power is the answer, there is no tax on the wind. Put a wind turbine up and it will provide all your energy needs. No more electric bills, drill a well in the yard and no more water bills, have a couple of chickens and a goat and no more need for money. That is where Georgia lost its perspective, got away from pickin tobacco and cotton and went high tech, get back to Tobacco Road where the livin is easy, and a little moon shine on Friday night.

Karl Marx

January 12th, 2011
1:16 pm

This report is not a disapointment. It is a mirror of what the Republican party really is. Republicans are all RINOS and it is the party of Big Government for Big Business. There is little difference between them and the Democrats.

Patriot

January 12th, 2011
1:16 pm

Eliminate state and local government, allow the competitive free market to provide those services that people are willing to pay for, and be done with it. The fundamental presumption in all of this is that we actually NEED all the government that government folks wish to preserve and protect through taxation. Taxes are nothing more than a convenient way to make sure you get money that nobody in their right mind would give you voluntarily. At least if government wished to simply charge fees for the services they provide, allow free an open competition from others for the provision of these services and allow folks to purchase on a voluntary basis, there might be some justification for the dollars.

It is high time for folks to wake up and make a serious decision about the role of government. It is clear that government is not going to be thinking very hard on this issue. They have a vested interest, but so do we. There is not a single thing that government does that cannot be done as well if not better and as cheaply if not more so, by a free and competitive market of individuals or businesses.

The parasite will kill the host if given the chance.

catlady

January 12th, 2011
1:35 pm

Mr. Barr, they are not trying to be revenue neutral. They are trying to give a TCINO (tax cut in name only) so that the intellectually challenged of Georgia believe they are getting a good deal, even as they pay higher rates for everything. Like the Fair Tax, this may have its genesis in a good idea, but in the REAL WORLD where we live the costs will continue to go up, the profits will continue to go up, and most of us will continue to be poorer. The folks want us to pay higher (consumer) taxes for several years with the promise of lowering the income tax later, but, lo and behold! as with the toll on Georgia 400, when the day rolls around to lower the 6% income tax–there will be some reason why it can’t be done. It isn’t about being “fair” or “revenue-neutral”, its about getting more money for the state treasury. I say, give us the tax break NOW, and in 2014 or whenever, THEN add back the grocery tax and these other taxes. Show us you really mean it. Because, we KNOW, when 2014 rolls around the government will find it just “can’t do it right now.”

It’s fine to think in Big Concepts. The devil is in carrying them out. Georgia has proven for many years that it is full of suckers who will vote for things that ultimately are not in their best interests if cloaked in certain terms. This is no different, but maybe, MAYBE! Georgians will wake up and see it for what it is–yet another reach into their pockets.

Native Atlantan2

January 12th, 2011
1:45 pm

One of the most challenging issue Georgians face is the large number of counties in this state. How much sense does it make to build support structures for the our 159 counties on top of any local or city support? Not a huge impact to the taxpayer but consolidation appears to work well in the business world if planned and implemented properly based on realitic expectations and assumptions.

Trapped in a Red state

January 12th, 2011
1:52 pm

Will someone on this blog please tell me where individuals or corporations tax liability has gone up in the last 2 decades ? With the exception of a 1 % hike in sales tax occurring in 1989 ( from 3 to 4 %), taxes have remained the same in this state . Most counties however…thru votes at the local level have chosen to add various 1 % local sales taxes for these counties sole benefit. They are used to pay for education infrastructure , roads and other projects which directly benefited those same counties . The state tax on ‘net income’ has been 6 % for decades…now please tell me where the hell you are getting your information from because that source along with the rest of you on this blog simply do not have a CLUE about what you are talking about . This is not about the Feds…not about Obama…get it….

Trapped in a Red state

January 12th, 2011
2:02 pm

Patriot

What is your idea of utopia actually exist in a lot of the poorest countries on this planet…like Uganda .
How’s that utopia working for those Ugandans ?

Peter

January 12th, 2011
2:32 pm

No surprise……. Tax Food is next…… Republican’s LIVE the LIE !

Keep them Stupid…The “REAL” Republican Motto !

JD

January 12th, 2011
2:35 pm

The perfect argument for Libertarianism is the current weather situation. The city of Atlanta and state of Georgia have proven government ineptitude. For nearly 1 week, business in Atlanta has come to a standstill. After a plethora of automobile accidents and consequent injuries, the governments remain paralyzed. Despite taxing the citizens for support of the Department of Transportation, we have little to show for it: shoddy roadways, tolls that should no longer exist, clogged traffic and now, frozen roadways. Kasim Reed, Sonny Perdue ande Nathan Deal should be holding their heads in shame for misusing tax dollars. The problem is that there is no ACCOUNTABILITY in government. If there were, all three would be in prison and subjected to inhumane torture, much like their stupidity and inaction have caused the citizens of Atlanta and Georgia. That would be poetic; unfortunately, it will never happen. Nor will taxes ever be lowered. If this week is not a call to revolution, I don’t know what is.

EJ Moosa

January 12th, 2011
2:55 pm

You had a choice in the election. But you refused to support John Monds.

Dee Cypher

January 12th, 2011
3:34 pm

are ya watching folks? republicans raising taxes and cutting jobs. that’s right. just like they’ve done before. can you allow yourself to now admit it to yourself? will the politicians who tellyou how to think allow it? or will you believe them when they tell you again that everything they do is for children, God and patriotism. freedom is the ability to be allowed and allow yourself to think. sure wish you were allowed to think about that. it would do you and our country a lot of good.

jconservative

January 12th, 2011
3:42 pm

“one would have to consider the council’s report a disappointment.”

A disappointment? Yes. A surprise? No.

This is the Georgia Republican Party in charge. They have never seen a Tax Increase that, in the end, they could not support.

Our “friends” in Illinois just voted for a 66% tax increase. The Georgia legislature must be just dying of envy!

I hear very little talk about cutting spending, cutting the size of government and eliminating whole departments. Deal mentioned cutting 14,000 jobs but offset part of that by saying no more furlough days for teachers.

Cut a little here, increase a little there, and the first thing you know you are back where you started.

We need a complete re-thinking of the role of State Government in Georgia. There is no reason we cannot cut spending to the extent that a paid for tax cut could not be given to the tax payers. No reason!

Big Jim

January 12th, 2011
3:51 pm

Amazing,I thought republicans didn’t raise taxes. Amazing what you can get away with when you frighten people with tales of the Boogey Man aka
the black man.

Wasn’t Bob Barr a republican? Seems like a libertarian is republican in sheep’s clothing.

Big Jim

January 12th, 2011
3:55 pm

Didn’t Tater Perdue promise to put the kunfederate rag back on the state house? Smoke screen used to RAISE TAXES as any politician would do. When are kunservatives going to see you are just pawns.

Watch out kunservatives,there’s a minority trying to do something to you.Exactly what,Bob Barr and Rush Limbaugh will decide.

Big Jim

January 12th, 2011
3:57 pm

Peter

January 12th, 2011
2:32 pm
No surprise……. Tax Food is next…… Republican’s LIVE the LIE !

Keep them Stupid…The “REAL” Republican Motto !

I think republicans ARE stupid.Naturally.

luangtom

January 12th, 2011
4:03 pm

I find it amazing that the State of GA will even contemplate taxing food and other life-sustaining items. How in the world do other states maintain themselves and not have a sales-tax on all of the items that GA does? Could it be better money-management? I doubt we will ever hear a state officer admitting to that. It is a small wonder that GA does not attract the number of retirees that other warmer states do. The practices of their government officials drive would-be residents away. Instead of addressing why the budget has a short-fall, those in power just up the anty for the tax-payers. I find that immoral and not very progressive. Truly, this is a sad way to start out the new administration.

luangtom

January 12th, 2011
4:06 pm

Gee, maybe another avenue to save revenue would be to move GA to a uni-cameral legislature and not have two houses that cannot concur on much………..just a thought, it would save money to have half the number of spenders.

Robert

January 12th, 2011
4:26 pm

You get what you vote for but what about those of us who didn’t get who you voted for? Tax us anyway. Stuff it down our throats.

jj

January 12th, 2011
4:34 pm

The 66% hike in IL taxes is raising from 3% to 5%, still less than the 6% we pay in GA. In IL state and teacher pensions are tax exempt. Please don’t compare GA to IL unless you have lived in IL and understand how high their overall taxes are. (10% sales tax, 2.5-3x on propoerty taxes etc….)

khc

January 12th, 2011
4:48 pm

taxes in 2003 were on sin taxes and i think fee increases for drivers licenses and such……and should have passed then

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Richard Hombek

January 12th, 2011
6:28 pm

Simple administrative change = Revolution in taxation.
Case for the Composite Business Levy.

By Richard Hombek

The taxes we know today can be traced back millenniums, as far back as the Egyptians who were taxed in the form of crop percentages as recorded on papyrus around 3000 BC. Since then several forms of taxation have evolved and continue to do so as the system become ever more complicated and consequently, ever more inefficient.

The same business or individual can be taxed several times, even on items that are already taxed (i.e. gasoline). We have income tax, sales tax, real estate tax, property transfer tax, health tax, Employment Insurance, the Pension Plans, capital gain tax, capital tax, excise tax not even including licensing fees and tolls that could easily fill a page. The number of taxes imposed on Citizens and the level of taxation will soon reach historical highs once the full impact of the budget deficit is taken into account. And yet, we’re still ‘in progress’ as the system continually grows more complicated.

Tax codes and regulations are thousands of pages long and businesses and citizens are expected to know these regulations. It seems an absurdity, considering even specialists have to consult one another when examining the fine print of the law and even then, full compliance with all of the regulations is not a guarantee.

Imagine for a moment, the vast amount of administration costs associated with the imposition, collection and enforcement of each tax, toll and fee. To help understand this better, let’s take a look at real estate tax. To simply put a value on every piece of real estate property in a very small jurisdiction like Ontario costs $180,000,000/year and the cost of collection comes on the top of it. Annual real estate taxes in Canada amount to approximately 3% of Gross Domestic Product. Real estate properties are gradually becoming more liabilities than assets.

By using a personal experience, I can illustrate this example better. Several years ago, I was offered a research position in Westchester County in New York State. I was very excited about this opportunity and after some consideration, decided uproot my family from Ontario for a few years. One sunny spring weekend, our real estate agent took my wife and I house hunting. After visiting a few properties, a large bungalow with a swimming pool attracted our attention. The price was an extremely tempting $130.000. We couldn’t believe our luck! However, if something feels too good to be true, it probably is. The real estate tax was $26,000 a year. What does that mean? It means that if I bought the property, I would essentially be paying the local government of Westchester County the price of my house in taxes every five years. The situation in other US jurisdictions and in many Canadian municipalities has not yet reached that extreme however, we are moving in that direction.

A recent study from 2008 by Fraser Institute, estimated that the cost of compliance of tax regulations for businesses and individuals in Canada, as well as the administrative costs for the government, could reach over $30 billion per year. In the US this number is over $350 billion. The number does not include differed costs and unfunded liabilities such as pensions and benefits for the government and business employees. Also not included are the costs of lost business opportunities caused by a complicated taxation system.

The total amount of taxes collected by all levels of government in Canada is around 33% of Gross Domestic Product or in the range of $450 billion. Most people accept the fact that society needs certain levels of government and that we pay our taxes to support government activities. This should not mean however, total acceptance of wasteful and complicated methods of tax collection.

Many organizations and individuals are trying to improve the situation and offer solutions for the simplification or total overhaul of the taxation system (i.e. the Flat Tax, Fair Tax). Many of these suggestions however are politically dead at the start line because they change the current level of taxation, which would of course be opposed by all who would be subjected to increased tax obligations. For a while, I thought that any meaningful reform on the current taxation system was futile but I was wrong. What if I told you that a simple administrative change could eliminate all the taxes and complicated bureaucracy that goes along with it?

This administrative change is illustrated by using a simple mental exercise. Lets imagine that final price of the product or service to the consumer consists of the following major components:
- the cost of manpower to produce it (net pay plus all the payroll deductions)
- the cost of raw materials (net cost plus all the sales taxes)
- the cost of facilities ( rent or capital cost plus real estate taxes)
- the net income of the business
- the sales taxes.

The question is, what would happen if all net costs are separated from the taxes associated with them, then the remaining taxes are combined into one single charge?

The answer is: the creation of a new and sustainable taxation system. Let’s call this lumped together taxes and fees the “Business Levy” (BL). Created this way, the BL is not a new tax on business. It is simply a replacement as a single charge of all existing taxes already paid by the business or collected by the business on behalf of the government. This collection of all government revenues from a single source of gross business revenue will create a stable source of government revenue. So, how do we determine the BL to guarantee that the same level of government revenue collection? The solution is very simple. Let’s start with the definition of Gross Domestic Product (GDP). GDP is “the total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports”. If we take the sum of government budgets at all levels: municipal, provincial and federal, and subtract from it any transfers between governments, divided by the GDP, we get an average rate of “Business Levy.”

For a country like Canada, with complex taxation jurisdictions, we have to slightly complicate the system by introducing a “Composite Business Levy” (CBL), which consists of a federal, provincial and municipal component. The level of CBL will be determined for each sector of the economy and in each jurisdiction to reflect the current level of taxation. This will be a one-time exercise at the introduction of the new system. By taking this approach, taxes collected in specific provinces will be allocated to the respective province. Each taxation jurisdiction will retain freedom of changing their part of the CBL.

This system, very simple in nature, is able to replace all the tax codes and regulations. As a consequence, business and personal financial decisions will be made based on the outcome of transactions without tax implications.

Since business payroll deductions are included in this system, employees will receive the net pay under the new system to avoid changing of the total money supply in the economy and avoid inflation. All programs and benefits provided by the government will be fully financed and the administrative savings will give the governments new resources for extra stability. Capital gain and interest income are not considered as business revenue under this system. The combination of that and net employment income will allow individuals not involved with business activities out of the tax regulations and obligations. Business real estate taxes are automatically part of the BL system. Residential property taxes are also included in the scheme and financed partially by administrative savings offered by the new system. A slight increase in BL (1-2%) could be transferred to consumers in the form of a price increase.

The positive consequences of this approach will touch every citizen and business. Specific outcomes for each sector of economic activities will be described in separate articles. Displaced employees involved in the current taxation system could be transferred to other government departments, which experienced manpower deficit or presented with generous transition packages.

This approach to the taxation system reform is a realistic, politically and economically attractive for many reasons:
- saves more than $30 billion in Canada and $350 billion in USA a year
- eliminates all tax regulations
- makes country with such taxation system, very attractive place to do business
- does not change the level of taxation of any party involved
- does not change the money supply in the economy
- reduces the cost of services and goods manufacturing
- keeps individuals not involved in any business out of taxation system
- stable source of revenue related to GDP.

The economic impact of this reform can significantly reduce the budget deficits on federal and state/provincial levels. The governments can focus on governing and not be preoccupied with the revenue generation.
The collection and distribution system of government revenues is fully automated. The governments will have real time economic statistics for each sector of economy and each jurisdiction.

The implementation of this reform is very simple at negligible cost. What will be required to be a reality?
On the government side: determination of the average Composite Business Levy for each sector of economy in each jurisdiction (one time exercise), voiding all tax regulations and dealing with displaced employees.
On the business side: opening the special bank account called “Business Gross Revenue Account”. Any business gross revenue must be deposited to this account. The only functions of this account will be: retaining the information on the source of the revenue and redirecting the money to Government General Revenue Account according to Composite Business Levy and to business operating account.

Steve

January 12th, 2011
6:36 pm

Not really sure what I am supposed to be getting for all the taxes I pay. I live in the boonies and never see any law enforcement even though the “back road” in front of my house is a super speeders delight. Counted 7 in less than an hour today. If I want to put in a fence post the county charges me $50 and what do I get? Nothing so screw all you politicians and freeloaders.

jm

January 12th, 2011
7:05 pm

Bob, as always you’re an idiot. Closing tax loopholes is not a tax increase.

You’re just another corrupt, do-evil, former politician. The garbage you spew is how washington gets things done. Political donations for tax loopholes. You disgust me, to call yourself a Republican.

Go join another party.

GDR

January 12th, 2011
7:21 pm

In the immortal words of Townsend & Daltry…”Parking on the Left is Now Parking on the Right, Meet the New Boss/Same as the Old Boss – WON’T GET FOOLED AGAIN!” Nothing ever changes except the names of the players and Joe Sixpack gets shafted once more.

eatmotacos

January 12th, 2011
7:51 pm

Don’t forget that the Real Deal has also caved in on his “get tough on illegal aliens” stance, which figured substaintially in his election. This is no surprise to those of us who were in his Congressional District, which included the two Georgia towns with the highest concentration of illegal aliens(Gainesville and Dalton). The real charade here. is his and his predecessor’s strategy of associating 500,000 plus illegal aliens, primarily, with Georgia’s agriculture industry. As anyone in Dalton or Gainesville can tell you, it is a bold face lie. Less than 10% of illegal aliens work in agriculture. This has nothing to do with Deal’s suddenly becoming a humanitarian either – it’s all about the bottom lines of large corporations, who don’t want to lose their taxpayer subsidized, bargain labor pool.

John Barnes

January 12th, 2011
7:53 pm

Enjoy the ride. It seems some dummies in Georgia actually believed the low tax morons when they were running for office. Now its too late.

You will still remain bottom of the pile after 4 years.

eatmotacos

January 12th, 2011
8:20 pm

@ John Barnes: ” It seems some dummies in Georgia actually believed the low tax morons when they were running for office.”

Au contraire, There WILL be lower taxes, lax enforcement, lower regulations, etc., etc. etc., but not for the “unwashed” (Isackson’s term for the fools who continue to elect him and his ilk).

PayMoreToGetMore?

January 12th, 2011
9:11 pm

Hey Impeachment Bob, did you ever think that “revenue neutral” is not one of the Ten Commandments? Sometime you have to actually come up with more money (aka tax increases) to pay the bill.

Party supplies

January 13th, 2011
1:49 am

This post is Well Organized and Informative for the good party supplies and decorations solutions. Best luck of the future.

5 Easy Pieces

January 13th, 2011
7:59 am

Look, peoples: inflation and high taxes are dead ahead. Inflatax. Yes, Inflatax. This word has been coined and derived from the Keynesian/Dale Carnegie economic model developed during the Dead Cat Bounce rally of 1932, (and the greek). If I were to use this word in a sentence, I would do so thusly: “Uncle Sam bent over and grabbed his socks, cause the corporations he bailed out are going to go full geronimo on his sorry butt.”

I know, you’re saying, “where’s the Inflatax?”. And that’s a good question…..if you were a moron.

Just kiss your money goodbye, expect 5 dollar gas, and ten dollar cigarrettes, and stfu, I’m sick of capitalist pigs complaining about the communist chinese oil consumption accelerator.

Oh don’t reach for THAT one, Keyenesian dikwipes, it’s WAY over your head.

Tracy

January 13th, 2011
6:46 pm

“jm” sounds like a proud Georgia Republican.

Someone called his Party out on the truth, he gets angry and fires back. Forget facts, forget the increased gas cost, forget the increased power bills, forget closing tax loopholes that catered to the middle class.

We’re being nickle and dimed to death by Republicans and instead of cleaning up the Party that’s suppose to be against this, just ingore it.

We’re like Detroit or New Jersey, except it’s a Republican destroying the working middle class by government burden and taxes.

AJC columnists slam tax proposal

January 13th, 2011
9:14 pm

[...] Barr, a former member of Congress, ripped into the proposal yesterday: If providing the state a “fairer” tax system means taxing nearly every aspect of our lives – [...]