If Georgia’s Special Council on Tax Reform and Fairness gets its way, somebody’s taxes will be going up soon. And somebody else’s will be going down. And even though the 11-member panel has just begun its work and won’t issue a final report until January, it’s already possible to predict the likely winners and losers:
If you are middle class or working class, the council is going to propose that you pay more in state taxes. If you are affluent, the council will suggest that your taxes go down.
If you own a business or make a lot of money through investments, the council wants to make you feel welcome in Georgia by cutting your taxes.
But if your income depends on working for a paycheck, the council will suggest that you’ve been slacking off in your contributions to Georgia and that you need to pay more.
Of course, they won’t exactly put it like that. But that’s going to be the net effect.
How are such predictions possible, with five months of public hearings and debate still to come? Well, they’re possible because the council’s mission has been made pretty clear, and because its membership was designed to guarantee a certain outcome.
The council was created by legislation signed into law this year by Gov. Sonny Perdue. And while its official mission is to “conduct a thorough study of the state’s current revenue structure and make a report of its findings and recommendations” to the Legislature, its real assignment is more specific. Perdue and other state leaders, including House Speaker David Ralston and Lt. Gov. Casey Cagle, have made it clear that its primary mission will be to make Georgia’s tax structure more attractive to business.
As a result, other goals in designing a tax system, such as making sure that the tax burden is distributed fairly or that it produces a steady revenue stream to fund state government, have been given a much lower priority.
The narrowness of that mission is reflected in the narrowness of the council’s membership. Perdue is a member, as are four economists affiliated with Georgia universities. The other six members represent real estate, banking and business sectors, and include the chair of the Georgia Chamber of Commerce and the Georgia chair of the National Federation of Independent Business.
The goal of the council is to recommend ways for the state to lower or even eliminate taxes perceived as unfriendly to business, such as corporate and personal income taxes. Today, those taxes generate roughly $7.7 billion, or 54 percent of Georgia’s tax revenue.
But how do you make major tax cuts in an era when state revenues are already plummeting, forcing teacher layoffs and cutbacks in state services?
You do it by raising other kinds of taxes, specifically the state sales tax. You might, for example, reinstate the sales tax on food, which Gov. Zell Miller repealed in 1996 by arguing that “it’s wrong to tax the very thing that you need to live.” You might extend the sales tax to services, or simply raise the sales tax by a penny or two.
But let’s be clear: As you shift away from the income tax toward the sales tax, you inevitably shift the tax burden onto the poor and middle class. Those families don’t typically have unspent income. Every dollar they make ends up being spent, which also means it is vulnerable to a sales tax.
More affluent families, on the other hand, spend only part of what they make each year. And if they don’t spend it, it isn’t taxable through a sales tax. A move away from an income tax and toward the sales tax would produce much lower taxes for those already doing well, at the expense of those who are struggling to stay afloat in this tough economy.
But again, that’s not how the package is likely to be sold.