The fiscal insanity of a $220 million tax cut
Georgia’s roads and bridges are crumbling, in part because we are 49th in the country in per capita spending on transportation.
With our school system also one of the worst in the nation by many measures, we’re crowding more and more students into classrooms, with teacher furloughs and shortened school years required to make ends meet. We also lack the resources to provide basic human services, such as a trauma care network standard in many states, that would save the lives of an estimated 700 Georgians each year.
Times are tough. But with state tax revenues already ravaged by a deep recession, they aren’t tough enough to discourage our state legislators from proposing a new $220 million tax cut, with most of the benefits directed toward those Georgians who are already doing well:
“House Majority Leader Larry O’Neal, R-Bonaire, said the loss of revenue to the state is not without risk. But he said the plan, which he described as a state-level re-creation of President Ronald Reagan’s cut to the federal tax rate in 1981, would put the state in the forefront of the economic recovery.
“It’s an incredible balance, but the goose that laid the golden egg in America is free markets and capitalism,” he said. “The first [goal] is to make Georgia the most attractive place for the entrepreneurial spirit.”
As O’Neal acknowledges, his approach is “not without risk.” Before undertaking that risk, it sure would be great if we could study the experience of a state that had already slashed its taxes to the bone in an effort to make itself more attractive to business. By studying what happened there, we could get a pretty good idea of what to expect from this latest plan.
The good news is, such a state exists. The bad news is, that state is Georgia. Take a look at the numbers below, compiled by Georgia State University’s Fiscal Research Center:
Source: GSU Fiscal Research Center
– Between 1989 and 2010, revenues from Georgia’s corporate income tax were slashed by 46 percent per capita.
– Between 2000 and 2010, per capita revenue collected through the personal income tax in Georgia fell by 26 percent.
– Between 2000 and 2010, per capita revenue from the sales tax fell by 31 percent.
– Overall, state-generated revenues in Georgia have fallen by 27 percent per capita over the last ten years, making Georgia the number one state in the nation in that regard.
By 2008, Georgia not only ranked last in the nation in state-generated revenue per capita, we were 18 percent below the average even among our fellow low-tax states in the Southeast.
Our neighbor to the west, Alabama, collected $617 more in state revenue per capita than Georgia. Mississippi collected $565 more per capita. South Carolina collected $566 more per capita than Georgia. In fact, as the GSU study notes, “if Georgia were to raise state and local … revenues to the Southeastern average, this would be equivalent to $2.7 billion in additional revenues.”
Given that data, if O’Neal’s theory held any water whatsoever Georgia ought to be swimming in jobs and growth. So how are we doing?
Well, our unemployment rate is 10.2 percent, well above the national average. In 1999, we ranked 21st in the country in per capita income, and were rising fast, up from 35th in 1979. Ten years later, in 2009, we had fallen back to 39th, which is worse than we ranked 30 years earlier.
For the past decade, Georgia has been losing the type of high-paying jobs attracted by good infrastructure, quality schools and an attractive quality of life, perhaps because it hasn’t been investing in good infrastructure, quality schools and an attractive quality of life.
And until 2008, the jobs we had been adding were increasingly low-wage, low-skill jobs of the sort that are most vulnerable in a recession. Once the economy tanked, those jobs disappeared as well.
Almost 150 years ago, a man by the name of William Tecumseh Sherman came to town and bragged that “I intend to make Georgia howl.” These days, we’re doing it to ourselves.
– Jay Bookman
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© 2011 The Atlanta Journal-Constitution
1,058 comments Add your comment
Fred
April 7th, 2011
9:41 am
It’s typical of Republicans
Finn McCool
April 7th, 2011
9:45 am
Republican mantra:
I gotsa have me a tax cut or i’ll die!!!
Let sumbody else pay for this great country. But not ME!!!!
Harry Callahan
April 7th, 2011
9:46 am
“Times are tough. But with state tax revenues already ravaged by a deep recession, they aren’t tough enough to discourage our state legislators from proposing a new $200 million tax cut, with most of the benefits directed toward those Georgians who are already doing well:”
Since “those Georgians doing well” already pay the vast majority of the taxes, jay, maybe you could tell us how to structure a tax decrease that does otherwise.
USinUK
April 7th, 2011
9:46 am
everybody knows the best way to increase your income is to ask for a pay cut!!
USinUK
April 7th, 2011
9:47 am
(and, yet, it’s the DEM party that’s pawning our children’s inheritance … oy)
Harry Callahan
April 7th, 2011
9:47 am
“Times are tough”
What’s wrong with letting people keep a little more of their money if times are tough, Jay?
WOW #1
April 7th, 2011
9:47 am
It’s Bush’s fault.
“Almost 150 years ago, a man by the name of William Tecumseh Sherman came to town and bragged that “I intend to make Georgia howl.” These days, we’re doing it to ourselves.”
So give more of your money to the IRS, Jay.
“Georgia’s roads and bridges are crumbling, in part because we are 49th in the country in per capita spending on transportation.
Ever been to Illinois, Indiana, Ohio, Michigan? Their roads are HORRIBLE.
But yeah, it’s all the GOP’s fault.
Harry Callahan
April 7th, 2011
9:48 am
Maybe the “Georgians doing well” need that tax decrease to keep from laying off employees at their small businesses during these “tough” economic times.
Peadawg
April 7th, 2011
9:49 am
everybody knows the best way to reduce debt is to spend more!!
Keep Up the Good Fight!
April 7th, 2011
9:50 am
The magic bullet for all Republican governors seems to be “tax cuts/credits”….. who will be the first to cut the corporate tax rate to 0% and then give them money…
If 50 states (or even 10 states) vie for the bottom, it only means that the corporations will play the states against each other,
Harry Callahan
April 7th, 2011
9:50 am
“Our neighbor to the west, Alabama, collected $617 more in state revenue per capita than Georgia. Mississippi collected $565 more per capita. South Carolina collected $566 more per capita than Georgia. ”
Maybe you should move to Alabam, Mississippi, or South Carolina. Having been to all three recently, I prefer to stay here.
WOW #2
April 7th, 2011
9:50 am
OFF TOPIC #1
Another government screw up.
Another air-traffic controller falls asleep
A second air-traffic controller has been found sleeping on the job at night — this time intentionally. And the government said Wednesday he’s being fired for it.
http://travel.usatoday.com/flights/story/2011/04/Another-air-traffic-controller-falls-asleep/45843484/1
Jay
April 7th, 2011
9:50 am
Confronted with data, you unthinkingly regurgitate the slogans that have been drummed into your head, and then call it good.
Those responses explain far better than I ever could how we have gotten into this situation.
Harry Callahan
April 7th, 2011
9:51 am
Jay, you never told us in the “Ryan Budget Part III” blog why Obama didn’t veto extension of the Bush tax cuts.
stands for decibels
April 7th, 2011
9:52 am
our unemployment rate is 10.2 percent, well above the national average. In 1999, we ranked 21st in the country in per capita income, and were rising fast, up from 35th in 1979. Ten years later, in 2009, we had fallen back to 39th, which is worse than we ranked 30 years earlier.
Jay, that’s not a bug, that’s a Slavery 2.0 feature, you silly goose, you.
Harry Callahan
April 7th, 2011
9:52 am
“Confronted with data, you unthinkingly regurgitate the slogans that have been drummed into your head, and then call it good.”
Confronted with valid reason for reducing taxes, you unthinkingly dismiss them as slogans without addressing them on their merit, and call it good.
Paul
April 7th, 2011
9:52 am
Jay
Why does it have to be, that when you fool most of the people all of the time, it has to be the people in your legislature?
Texas has one of the worst budget shortages in the nation. Know what some of these conservative, free market Republicans are doing?
Ending lucrative tax breaks for corporations.
In other words, increasing their taxes.
Jay
April 7th, 2011
9:53 am
Harry, if you can’t figure that out one for yourself, there’s nothing I can do to help you.
WOW #3
April 7th, 2011
9:53 am
“you unthinkingly regurgitate the slogans’
Like these?
HOPE AND CHANGE
CHANGE YOU CAN BELIEVE IN.
YES WE CAN
WTF
IMPEACH BUSH NOW
OUT OF IRAQ NOW
Those?
TaxPayer
April 7th, 2011
9:54 am
If they just cut enough and don’t let spending take over then the Laffer Curve will kick in and unemployment will plummet and everyone will be happy and wealthy. You gotta have FAITH, Jay!
Harry Callahan
April 7th, 2011
9:54 am
Jay, on the other blog I called you out for bashing Bush for deficitds, but embracing Obama for doing the same. You said Obama has to ahve deficits because of the recession. Is Georgia not in recession? Why is extension of the Bush tax cuts good but a modest tax reduction of taxes in Georgia bad?
Is it because democrats did one and republicans did the other?
Harry Callahan
April 7th, 2011
9:56 am
Jay, I’m not too bright, so help me keep up, OK? You’re saying that higher deficits in a recession are OK if due to increased spending, but NOT OK if due to tax decreases?
Southern Comfort (aka The Man)
April 7th, 2011
9:57 am
Fiscal insanity is the GOP way, isn’t it?
Overall, state tax revenues in Georgia have fallen by 27 percent per capita over the last ten years, making Georgia the number one state in the nation in that regard.
We’re #1!! We’re #1!! We’re #1!! We’re #1!! We’re #1!!
Oh, wait. That’s not a good thing to be #1 in is it, especially when your infrastructure is crumbling and nobody wants to bring serious jobs there because workers would be stuck in traffic for hours which cuts into worker productivity.
Finn McCool
April 7th, 2011
9:57 am
In 1999, we ranked 21st in the country in per capita income, and were rising fast, up from 35th in 1979. Ten years later, in 2009, we had fallen back to 39th, which is worse than we ranked 30 years earlier.
Good job, Republicans!!!! Always working our way backwards! At least Republican leadership is consistent — consistently worse!
USinUK
April 7th, 2011
9:58 am
taxpayer – 9:54 – cuz everyone knows, when big corporations make huge profits they go on a hiring spree!!!
oh, wait …
josef nix
April 7th, 2011
9:59 am
OOOHH charts, graphs…now we know where the Bruin’s been…
Normal
Answered you on this one downstairs
http://www.ajc.com/news/gambling-questions-slow-effort-901532.html?cxtype=rss_news
Harry Callahan
April 7th, 2011
9:59 am
“In 1999, we ranked 21st in the country in per capita income, and were rising fast, up from 35th in 1979. Ten years later, in 2009, we had fallen back to 39th, which is worse than we ranked 30 years earlier.”
How do you think unchecked illegal immigration plays into that?
Fred
April 7th, 2011
10:00 am
What gets me is the total lack of thought exhibited by some posters. if the Republicans do something (no matter HOW insane) it is immediately “good.” They can’t tell you WHY it’s good though just type in some cute little slogans.
The bottom line is there is a deficit. It wouldn’t be as bad if there wasn’t so much theft, like Sonny’s little land deal. However when you add the huge graft into the already diminishing funds it just gets worse. Even the Republicans should realize that they have to have the money from the State in order to steal it……..
Ryan Shakur
April 7th, 2011
10:00 am
Thanks for the reality check Jay. This is information that is public, yet politicians say otherwise pumping theories of re-energizing the economy with such measures. In all seriousness people, it takes money spent to have money made.
Harry Callahan
April 7th, 2011
10:00 am
Hey Finn, have you figured it out yet?
godless heathen
April 7th, 2011
10:00 am
On Tuesday the Committee on House Administration issued a statement that included a definition of “essential employee” in case of a government shutdown.
________________________
someone “whose primary job responsibilities are directly related to constitutional responsibilities, related to the protection of human life, or related to the protection of property.”
________________________
Sounds like a litmus test that should be applied to all government employees, shutdown or not.
Keep Up the Good Fight!
April 7th, 2011
10:01 am
Oh sure, blame the Chicken Man….. Its Perdue’’s fault! When is Deal ever going to take responsibility. Its his problem now
jconservative
April 7th, 2011
10:01 am
I would not mind the $200 million tax cut if the same bill had $200 million in spending cuts.
The Reagan model is not the model we want to follow. Reagan cut taxes and increased spending. The taxes cut resulted in no great increase in revenue and the lack of spending cuts to match the loss in revenue caused the first multi-trillion dollar National Debt. A trend that continues to this very day.
Cuts in revenue must be offset by cuts in spending. Anything else is juvenile, at best.
Jonas
April 7th, 2011
10:01 am
No matter what the per capital tax paid is- we are paying for steak and lobster and having rabbit turds thrown at us from increasingly inefficient, ineffective, and bloated govts.
How can one write this article without writing about the failures of gov’t across the board?
Harry Callahan
April 7th, 2011
10:01 am
“What gets me is the total lack of thought exhibited by some posters. if the Democrats do something (no matter HOW insane) it is immediately “good.” They can’t tell you WHY it’s good though just type in some cute little slogans. ”
Fixed it for ya, fred.
jm
April 7th, 2011
10:02 am
Jay, by citing everything on a per capita basis, you obviously raise the question: how much of state government spending is variable, and how much is fixed?
Jay
April 7th, 2011
10:02 am
Harry, in a state with a GDP of almost $400 billion, a state that already ranks 50th in the country in per capita state revenue, an additional tax cut of $200 million will do nothing to stimulate the economy. It is far too small to have such an effect, but it is more than enough to rip a big hole in the state budget.
Harry Callahan
April 7th, 2011
10:03 am
“How can one write this article without writing about the failures of gov’t across the board?”
Yeah, Bookman thinks we ought to throw more money at the disfunctional school boards in Atlanta, Dekalb, Clayton, etc….
Fred
April 7th, 2011
10:03 am
Oh yeah Harry. It’s all “them mesicans” fault. Well thought out point. You got me convinced. Let’s all go out and shoot an illegal for God and Country. THEN we will all have jobs and the cash will come flowing in………..
Finn McCool
April 7th, 2011
10:03 am
So, when did GA all start falling apart?
Republican policies: great if you’re rich. And if you’re not rich, the rich will get you to drink their Kool-aid and beleive you are just inches away from joining their ranks!
“You’re not working hard enough – 60 hours a week is not enough!”
“Umm, can I get some profit sharing?”
“No, I won’t share the profits in my company. But you should want this company to do better and you will show that by working 80 hours….and by the way, we are cutting your benefits – you now get 5 full paid vacation days a year. Sorry, but someone has to pay”
Harry Callahan
April 7th, 2011
10:05 am
“Jay, by citing everything on a per capita basis, you obviously raise the question: how much of state government spending is variable, and how much is fixed?”
Careful now, jm. Your question is dangerously close to the one I posed at 9:59. You are asking the liberals to move past throwing ouot numbers and actually doing some meaningful analysis. They really haven’t got the intellectual chops for that type of thinking.
Finn McCool
April 7th, 2011
10:06 am
How do you think unchecked illegal immigration plays into that?
Oh my! So fast to blame the poor! Who is the republican scapegoat this week?
Illegal immigrants!
REminds me of an old commercial:
“I’m gonna wash that responsibility right out of my hair.”
Harry Callahan
April 7th, 2011
10:06 am
Fred, nice ad hominem attack, and nice dodge of the question. You have established your liberal bonafides to my satisfaction.
Steve P.
April 7th, 2011
10:07 am
Why don’t we just eliminate all taxes and close the government. Close the schools, fire all of the cops and firefighters and let everyone run down to Walmart and get a few guns for protection. Your on your own, survival of the fittest. Thats where we are headed….. dirty water, dirty air, poisonous food, illiterate kids, but by god we will have profitable corporations and a few rich folks. Georgia can join the ranks of other third world powerhouse countries like Somolia.
Rational
April 7th, 2011
10:07 am
Maybe, and I bet this has something to do with the rationale behind them cutting taxes, if we lower corporate income taxes in this state we’ll attract some business from the states with higher corporate tax rates? It only makes sense, at least to those of us able to think for themselves. And, it seems to be working, since every time I look at the Atlanta Business Chronicle (which I admit isn’t much, cause I have better ways to put myself to sleep at night) I read about some new company that is moving here or thinking of moving here. But, all tax cuts are a bad idea if they help the rich, cause only the government can decide when you have enough money, and how much of what you earn you should be able to keep.
Bosch
April 7th, 2011
10:08 am
“I would not mind the $200 million tax cut if the same bill had $200 million in spending cuts.”
Yeah, me too, problem is, there’s nothing left to cut.
Granny Godzilla
April 7th, 2011
10:09 am
Stuff like this – 200 million dollar tax cut – explains stuff like this:
This should come as something of a surprise: President Barack Obama’s approval rating is near even in Georgia, with 47% of voters approving of his job performance to 48% who disapprove.
Moreover, he stands a decent chance of becoming the first Democrat to carry the Peach State since Bill Clinton in 1992. He trails the two Republican front-runners by just three points apiece, and he’s ahead of Sarah Palin and Georgia native sons Herman Cain and Newt Gingrich.
Public Policy Polling
Keep it up Georgia GOP – Please.
Jay
April 7th, 2011
10:09 am
jm, that’s how the experts at GSU presented the data. Don’t you agree that it’s the most accurate way to present it? Don’t you have to account for population changes in handling such numbers?
Southern Comfort (aka The Man)
April 7th, 2011
10:09 am
Sounds like a litmus test that should be applied to all government employees, shutdown or not.
What about those responsible for processing the payroll for those “essential” employees? What about the support staff like IT for those “essential” employees? The “essential” employees will be working, but payroll will not. “Essential” employees will not get paid until a resolution is signed and then “non-essential” payroll people come back.
Normal
April 7th, 2011
10:09 am
Josef,
Thanks for the answer..
It will be interesting to see how that unfolds. As to the bad blood, I want to read up on it. Finally, I would like to see a casino…Texas Hold ‘em, anyone?