Will Ga. GOP dare to raise your taxes?

Note: This post includes material published here earlier, as well as fresh material discussing a similar tax plan proposed in Louisiana by Gov. Bobby Jindal. It is posted as the electronic version of today’s AJC column:

On the final day of the 2013 legislative session, a group of Republican legislators introduced “The Georgia Fair Taxation Act.” By doing so, they set the stage for what may prove to be the most important legislative battle of next year’s session, or potentially the decade.

“This bill is the beginning of the discussion to eliminate the income tax in the state of Georgia,” state Rep. Tom Kirby of Loganville said in announcing the legislation. According to Kirby, he has already conferred with and agreed to work with Senate President Pro Tem David Shafer, who has proposed similar legislation on the Senate side.

To offset the billions in revenue that would be lost by eliminating both the personal and corporate income tax in Georgia, Kirby says, the state sales tax would have to jump by three to 4.8 percentage points. In metro Atlanta, that would produce a combined state and local sales tax of roughly 11 or 12 percent. (As we’ll see, the actual number would be higher still.)

In addition, the reach of the state sales tax would be expanded considerably, perhaps to food and other items. The national version of the so-called “FairTax,” cited by Kirby and others as a model for Georgia, would apply the sales tax to items such as rent, health care and tuition.

Such a proposal creates many problems, but here are three of the largest:

1.) The change would mean major tax increases for the vast majority of Georgians, and major tax reductions for the wealthy and corporations. There’s no dispute among economists: As a revenue system becomes more reliant on the sales taxes, it hits the poor and middle class harder while providing large tax breaks for the wealthy. The single step of eliminating the corporate income tax would shift $735 million in taxes onto consumers.

2.) When asked about that massive shift in tax burden in a press conference last week, Kirby brushed it aside, asserting that greater prosperity and more jobs would more than compensate for higher taxes on the non-wealthy. “We bring this piece of the puzzle, and we can see an exponential increase in the number of businesses looking at Georgia,” he predicted.

The problem is, there is no evidence to support that claim. For example, in announcing the legislation, Kirby repeatedly cited competition from Tennessee and Florida, pointing out that those neighboring states have no income taxes. Given the economic miracles that an absence of an income tax is said to produce, those states must be booming, right?

Wrong. Per capita GDP in both Tennessee and Florida is well below the national average, and below that of Georgia as well. Tennessee has lost 3.5 percent of its jobs in the last five years, compared to 5.9 percent in Georgia and 7.2 percent in Florida. So the absence of an income tax doesn’t seem to have done them any great favors.

3.) The sales tax increase needed to keep the system revenue neutral will be considerably higher than the estimate of 3 to 4.8 points. That estimate was derived through “dynamic economic modeling”, which is a fancy way of saying “just making numbers up.” “Dynamic modeling” assumes that Georgia’s new tax system will create an economic boom, which in turn will generate a lot of new revenue. It is pure conjecture.

If that magic revenue doesn’t appear, as it probably won’t, Georgia’s battered budget would suffer even more whacks with a meat ax.

If Republican leaders are being honest about their commitment to reform, they have the muscle to force it through. Shafer, the Senate’s top leader, is championing the concept. As a congressman, Gov. Nathan Deal was a strong supporter of the FairTax at the national level. And among the co-sponsors of Kirby’s bill in the House are Ed Lindsey, the House majority whip, and Donna Sheldon, chair of the House Republican Caucus.

And once put to a floor vote, such a measure will be hard for GOP legislators to oppose. As state Rep. Buzz Brockway pointed out in last week’s press conference, “It is tough to win a Republican primary in the state of Georgia and be against the FairTax. So I think on the Republican side there is broad support for the FairTax model.”

Brockway’s correct: Much of Georgia’s Republican base harbors a cult-like obsession with the FairTax. But I don’t believe it is true of the electorate in general.

In conservative Louisiana, for example, Gov. Bobby Jindal has proposed a sweeping tax-reform proposal much like that championed by Kirby, Shafer and others. It too would replace the state income and corporate tax with a broader, higher sales tax, among other changes, and the rhetoric used to defend the change is familiar as well.

“Eliminating personal income taxes will put more money back into the pockets of Louisiana families and will change a complex tax code into a more simple system that will make Louisiana more attractive to companies who want to invest here and create jobs,” Jindal said in announcing the effort.

However, according to a new poll, 63 percent of Louisiana residents oppose the proposed tax reform, and strong opposition to the plan helps to explain a 22-point collapse in Jindal’s job-approval numbers. In fact, Jindal is now less popular in deep-red Louisiana than Barack Obama, a fact that does not bode well for the governor’s presidential ambitions.

To complicate things further, the poll cited above was taken before the Jindal administration was forced to admit that it had badly underestimated how high the sales tax would have to increase to keep the plan revenue neutral. That too should sound familiar.

As the Shreveport Times reports:

“They may call it reform of the tax system but two-thirds of Louisiana sees it as a tax increase,” (pollster Bernie) Pinsonat said. “We did the poll before his revenue secretary increased it. (Opposition) would probably be 70-72 percent now.”

In other words, this is yet another idea that has been planted and carefully nurtured within the right-wing’s intellectual hothouse, but that withers and dies once it is exposed to real-life political conditions.

– Jay Bookman

407 comments Add your comment

Keep Up the Good Fight!

April 3rd, 2013
12:13 pm

Another tick on the checklist for the base.

Kamchak ~ Thug from the Steppes

April 3rd, 2013
12:14 pm

However, according to a new poll, 63 percent of Louisiana residents oppose the proposed tax reform, and strong opposition to the plan helps to explain a 22-point collapse in Jindal’s job-approval numbers.

Oops.

CJ

April 3rd, 2013
12:15 pm

Enrich the Rich: Vote Republican

Regnad Kcin

April 3rd, 2013
12:15 pm

Why do republicans hate the middle class?

Joe Hussein Mama

April 3rd, 2013
12:15 pm

I look forward to our con regulars coming on to tell us what a good idea this is and how much individual taxpayers are going to benefit from it.

JohnnyReb

April 3rd, 2013
12:17 pm

States with no income tax and where the tree huggers have not taken control are better economically.

Compare no further than California to Texas.

California is the petri dish for Liberalisim. It has some of the highest tax rates, unemployment, and debt in the nation at close to 3/4 trillion. Stockton is going bankrupt with reports of other cities following.

Texas has one of the lowest unemployment rates, has about 11 Billion, that’s with a B surplus, and the last city to go bankrupt was in 1997.

Georgia can’t get to no income tax fast enough.

getalife

April 3rd, 2013
12:18 pm

Yeah, jindal blew it when his tax increase keeps getting higher.

He is another gop disaster.

Ivan

April 3rd, 2013
12:20 pm

Why is the left opposed to tax reform?

Regnad Kcin

April 3rd, 2013
12:22 pm

Voters a re going to love paying 12% sales tax on their rent. Landlords are going to love being tax collection agents. Everybody wins!

CJ

April 3rd, 2013
12:22 pm

Johnny Reb,

Here’s a February 2013 report that you might like to read in order to update your misinformation: “States with ‘High Rate’ Income Taxes are Still Outperforming No-Tax States”

Here’s an excerpt: “In reality, states that levy personal income taxes, including the states with the highest top rates, have seen more economic growth per capita and less decline in their median income level over the last ten years than the nine states that do not tax income. Unemployment rates have been nearly identical across states with and without income taxes.

http://www.itep.org/pdf/lafferhighrate.pdf

mm

April 3rd, 2013
12:23 pm

Everyone sees this as a Robin Hood in reverse except for the dolts that vote for these crooks.

Obama – I need $100 million so we can map the human brain.

GOP response – We can do it for $50 million if we only study conservative brains.

JohnnyReb

April 3rd, 2013
12:23 pm

“That estimate was derived through “dynamic economic modeling”..

The masters of dynamic economic modeling are in the Obama administration where when they use it to paint a rosie picture for Obama propaganda the Left finds no fault. But when GA Repubs use it, it’s quite the different story.

CJ

April 3rd, 2013
12:25 pm

Ivan @12:20,

Because the right’s definition of “tax reform” is to raise taxes on the poor and middle class in order to pay for tax cuts for the wealthiest among us.

Oscar

April 3rd, 2013
12:25 pm

The left is in favor of tax reform. They are just not interested in shifting the burden from the rich who can afford taes to the poor who cannot afford higher taxes.

GOP = Robin Hood in reverse. They want to steal from the poor and give to the rich.

Keep Up the Good Fight!

April 3rd, 2013
12:27 pm

The masters of dynamic economic modeling are in the Obama administration where when they use it to paint a rosie picture for Obama propaganda the Left finds no fault

Paul Ryan says “what”?

getalife

April 3rd, 2013
12:28 pm

The gop decided the cons are so brainwashed, they could raise their taxes.

cons like reb would happily pay higher taxes so his corporate masters pay less.

Mick

April 3rd, 2013
12:28 pm

Thank god I got to experience america in the 50’s & 60’s where the taxes were progressive and no one was complaining about it – maybe that’s one of the reasons we were so “great” back then.
Today, that’s the republicans number one issue 24/7 taxes, taxes, taxes and their strategy always seems to be on how intent they are to keep lowering them for the wealthy; the very people who can damn well afford to pay them!!!

JohnnyReb

April 3rd, 2013
12:28 pm

CJ – you don’t like my Cal to Texas comparison? Switch Cal to New York state. The Left is in charge, excuse me, the tree huggers are in charge except for NYC where nanny Bloomberg reins. Population has plummeted – those that can are leaving. The state is even running commercials on how they have lowered taxes, etc.

Jay

April 3rd, 2013
12:28 pm

JohnnyReb, document your claim that the Obama administration has ever used dynamic modeling in its budget projections.

JohnnyReb

April 3rd, 2013
12:29 pm

getalife – I keep searching for an adjective that accurately describes you that Jay and the bluenose allow, but no joy thus far.

getalife

April 3rd, 2013
12:30 pm

reb is a self defeatist but cons here told jindal to shove his higher taxes.

CJ

April 3rd, 2013
12:30 pm

Johnny Reb,

Read the report.

Normal, Plain and Simple

April 3rd, 2013
12:31 pm

“GOP response – We can do it for $50 million if we only study conservative brains.”

Because everybody knows conservatives are half wits… :lol:

zebra

April 3rd, 2013
12:31 pm

I think you meant deep-red Louisiana, Jay.

getalife

April 3rd, 2013
12:31 pm

reb,

Like you said about Buffett, if you want to pay higher taxes write the check you self defeatist.

ty webb

April 3rd, 2013
12:32 pm

jay,
louisiana is “deep blue”?

Paul

April 3rd, 2013
12:33 pm

“In other words, this is yet another idea that has been planted and carefully nurtured within the right-wing’s intellectual hothouse, but that withers and dies once it is exposed to real-life political conditions.”

“real-life political conditions.”

Or as I like to call it, ‘real America.”

johnnyreb

“Texas has… about 11 Billion, that’s with a B surplus,”

You have a cite for that? I live in Texas, read a daily newspaper and that would come as a surprise to most Texans. We have to balance the budget (which the legislature and governor do some pretty obvious accounting gimmicks and cutting education, going for toll roads instead of using tax revenue, that sort of stuff) but an $11 billion surplus?!!?

You sure you don’t mean the Rainy Day Fund, funded by oil and gas, that’s not part of normal budget process?

Joe Hussein Mama

April 3rd, 2013
12:35 pm

Jay — “JohnnyReb, document your claim that the Obama administration has ever used dynamic modeling in its budget projections.”

Sorry, Jay. J.Reb already said earlier this week that he wasn’t going to post evidence or links any more. Guess you’ll just have to take his word for it. :)

CJ

April 3rd, 2013
12:37 pm

Johnny Reb,

More bad news for you: “A new report just released by the Institute on Taxation and Economic Policy shows the Lone Star State economy lagging far behind states that have income taxes. Reviewing economic data over the past decade In measures of growth per capita, median household income growth, and average annual unemployment rates, the study show Texas and other non-income tax states like Florida, Tennessee, and Nevada all grew slower than states like Oregon, New York, and California that collect personal income taxes.

http://austinist.com/2013/03/08/texas_economy_trails_slowly_behind.php

BSNBC

April 3rd, 2013
12:39 pm

Only Obama Zombies love to raise taxes!

Peadawg

April 3rd, 2013
12:39 pm

The GOP and the Rich go together like “lamb and tuna fish. Or maybe you like spaghetti and meatball, you more comfortable with that analogy?”

Peadawg

April 3rd, 2013
12:40 pm

“Only Obama Zombies love to raise taxes!”

Nathan Deal is an Obama Zombie?

CJ

April 3rd, 2013
12:40 pm

Actually, BSNBC, despite your false assertions, it’s the Republicans under the Gold Dome who want to raise taxes (on the poor and middle class) via the “The Georgia Fair Taxation Act.”

Paul

April 3rd, 2013
12:40 pm

Are we waiting for JohnnyReb to look up the definition of ‘dynamic modeling’?

Granny Godzilla

April 3rd, 2013
12:41 pm

GA GOP…….Proceed.

Snicker

Granny Godzilla

April 3rd, 2013
12:42 pm

I say again JAY…..

Have you ever considered a foray into politics?

Joe Hussein Mama

April 3rd, 2013
12:42 pm

CJ — “the study show Texas and other non-income tax states like Florida, Tennessee, and Nevada all grew slower than states like Oregon, New York, and California that collect personal income taxes.”

And FWIW, there’s no SALES TAX in the state of Oregon.

There are some local and county sales taxes scattered about, but no state-level sales tax.

Jay

April 3rd, 2013
12:43 pm

Thanks Ty, good catch. Fixed it.

Joe Hussein Mama

April 3rd, 2013
12:43 pm

BSNBC — “Only Obama Zombies love to raise taxes!”

Either you didn’t read Jay’s piece or else you’re doing a great impression of a rock-head Republican.

Mick

April 3rd, 2013
12:43 pm

paul

Glad you chimed in about that texas 11 billion surplus, must be some enron type of accounting going on there or maybe W painted a portrait of it…

clem

April 3rd, 2013
12:44 pm

tell us anything that has improved under repub leadership in ga besides the pocket of the well contected and repub pols like perdue, chip rogers, graves, & deal?

Jay

April 3rd, 2013
12:44 pm

Granny, no.

As someone once said, before he started talking to empty chairs:

“A man’s got to know his limitations.”

ty webb

April 3rd, 2013
12:45 pm

no problem Jay, typos are no big deal…now if you could just delete that racist post from earlier today.

CJ

April 3rd, 2013
12:45 pm

Thanks JHM,

Good to know, and amen to that!

FrankLeeDarling

April 3rd, 2013
12:45 pm

worst idea I have ever heard.

appleseed

April 3rd, 2013
12:46 pm

Where are the no new taxes teaquester?Higher sales taxes,along with double digit inflation.Open wide the gate for the needed assistance,and rising totals for poverty.

Granny Godzilla

April 3rd, 2013
12:47 pm

It’s a pity Jay, the democratic bench in GA looks like as light GOP bench nationwide….

You would most certainly be a major improvement.

Mick

April 3rd, 2013
12:48 pm

granny

I think maybe you should toss your hat into the ring of fire – you certainly have the passion…

Granny Godzilla

April 3rd, 2013
12:50 pm

Mick

Thanks, but I inhaled.

JohnnyReb

April 3rd, 2013
12:51 pm

Jay

April 3rd, 2013
12:28 pm

JohnnyReb, document your claim that the Obama administration has ever used dynamic modeling in its budget projections.
__________________

It is my understanding that all economic forecasts use dynamic modeling. And, that econmic models become “dynamic” when they project results over time.

My point being, dynamic modeling is common economic forecast practice. There is no reason the administration would not use it, and there is no reason to find fault with GA legislators using it in their efforts to get to no income tax.

I am sure, however, if I am wrong you will let me know.

Erwin's cat

April 3rd, 2013
12:51 pm

Wrong. Per capita GDP in both Tennessee and Florida is well below the national average, and below that of Georgia as well. Tennessee has lost 3.5 percent of its jobs in the last five years, compared to 5.9 percent in Georgia and 7.2 percent in Florida. So the absence of an income tax doesn’t seem to have done them any great favors.

Just think how bad it would have been if they hadn’t eliminated the state income tax….

I don’t think taxing corporations more will bring them to GA

In the middle

April 3rd, 2013
12:52 pm

Do the math and prove you point with actual data and not just conjecture……….I don’t fall for the “panties is a twist” logic. Prove to me that a family of 4 making 50,000 will pay more taxes. That is all I ask. I promise to keep an open mind..

Matt321

April 3rd, 2013
12:52 pm

I lived in Texas for a few years, and Texas is a wonderful state full of wonderful people. But let’s not make it an economic ideal just yet, shall we? Texas has had a lot of jobs created, on the backs of a lot of people moving in. It also has had a booming energy sector to help balance the bottom line. But it’s true – everything’s bigger in Texas. That includes above national average poverty, above national average people without health insurance, and above national average people in low wage jobs.

Normal, Plain and Simple

April 3rd, 2013
12:53 pm

Granny Godzilla

April 3rd, 2013
12:50 pm

You inhaled? That will probably get you a cool couple hundred thousand votes this day and age… ;)

Redneck Convert (R--and proud of it)

April 3rd, 2013
12:54 pm

Well, the good news is, all the Job Creators will be creating so many new jobs with the money they save on taxes that the rest of us that get our taxes raised can get a extra job or two to help pay the taxes. I don’t know about you, but I don’t really need to spend 3 or 4 hours watching TV after work and then going to bed.

On the other hand if the new jobs come as slow as Trickle Down’s been working we might could be better off just dropping our pants and grabbing our ankles. Maybe the increased taxes will make us feel better about being dead in a few years.

Just thought I’d drop in my 2 cents worth before this blog goes to the new system. We can only hope Bookman’s as slow learning it as most libruls are in learning about the economy. When it comes I expect we’ll lose about half of the bloggers on here, seeing as how most of them have two or three different names.
My buddy Jim Earl says it’s for danged sure he won’t be joining the blog. He thinks all the info they want to collect about you is a Commie plot that will lead to a One World guvmint. And Jim Earl is a pretty smart guy.

Have a good p.m. everybody.

bff

April 3rd, 2013
12:54 pm

Yep…just as soon as they drop the state income tax I’m going stop buying EVERYTHING. I won’t need food, clothing, housing, fuel, cars, etc., etc., and I’m going to become a ga-zillionaire!

Jay

April 3rd, 2013
12:55 pm

No, Johnny. Common practice in Washington has been to project revenue based on a steady-state economy, without giving yourself credit for revenue that your policies will allegedly create.

Because once you start doing that, the difficult art of revenue projection becomes even more tainted by optimism and political gamesmanship.

Keep Up the Good Fight!

April 3rd, 2013
12:55 pm

I promise to keep an open mind.

Is that what you have locked in the box next to your chair? The hinges are so rusted, you might need so WD-40 to get them to move.

Matt321

April 3rd, 2013
12:56 pm

And I want to quickly add, Georgia will be far better off when we stop trying to be BUSINESS friendly and start trying to be PEOPLE friendly. Why do Republicans pretend to believe in miracle of free enterprise, but then rely on government coeercion/bribing large corporations to come to their state to give low wage jobs to citizens? If you want to see real economic growth, give every single Georgian a world class education, tie their wages to their work productivity, and make health care a right, not a privilege. Then watch an economic miracle as people are finally able to put their talents to use in a business they have a passion for. Or I guess we could keep giving gigantic tax breaks to companies so that undereducated Georgians can work in a warehousing distribution center for a company which won’t even give them healthcare.

UNCLE SAMANTHA

April 3rd, 2013
12:56 pm

STATES WITH NO INCOME TAX RELY HEAVILY ON TAXING PROPERTY

OR SALES TAX BASED ON A SPECIAL SITUATION (NEVADA/FLORIDA – TOURISM)

OR INDUSTRY WITH BIG REVENUES (OIL) NORTH DAKOTA, TEXAS

Steve

April 3rd, 2013
12:56 pm

Why the hell do I love in Georgia?

Welcome to the Occupation

April 3rd, 2013
12:56 pm

“..Kirby brushed it aside, asserting that greater prosperity and more jobs would more than compensate for higher taxes on the non-wealthy. “We bring this piece of the puzzle, and we can see an exponential increase in the number of businesses looking at Georgia”

Down here in Giowgia we bend down niccccccce and lowwwwww for Mistah captalist. And when he say ‘jump’, we say, ‘yessah, how high suh?’

Granny Godzilla

April 3rd, 2013
12:56 pm

Normal

God Bless Georgia Agriculture!

Kamchak ~ Thug from the Steppes

April 3rd, 2013
12:58 pm

It is my understanding that all economic forecasts use dynamic modeling.

It is my understanding that I’ll be dining with Nina Agdal this evening.

Normal, Plain and Simple

April 3rd, 2013
12:58 pm

Granny Godzilla

April 3rd, 2013
12:56 pm

:D

Welcome to the Occupation

April 3rd, 2013
12:59 pm

You see the problem with our resident cons, it’s ultimately about a slave mentality, a master-servant way of looking at the world. With Mistah Capitlist sittin pretty at the top.

CJ

April 3rd, 2013
1:00 pm

Here’s a timely article about the folly of dynamic scoring by a former economic adviser to the Reagan/Bush 41 administrations:

http://economix.blogs.nytimes.com/2013/04/02/dynamic-scoring-once-again/

Steve

April 3rd, 2013
1:02 pm

Why the hell do I still live in Georgia?

Regnad Kcin

April 3rd, 2013
1:03 pm

They’re gonna RAISE TAXES oN the lower and middle classes? No way! Don’t worry, the tea party will never let that happen! SAVE US, TEA PARTY!

Mick

April 3rd, 2013
1:04 pm

**Why the hell do I still live in Georgia?**

Beats me, florida is only a stones throw away and our legislature is even more republican and dumber than yours! Mercifully, they can’t legislate the weather, although I’m sure that might be a goal…

CJ

April 3rd, 2013
1:05 pm

In the middle @12:52,

I would advise you to do that math for your own household. Pull out last year’s Georgia income tax return and see how much you would save if state income taxes were eliminated. Then estimate how much you spend every year (total income minus savings plus acquired deficit spending (e.g., car loan, credit card balance,…) and apply the proposed sales tax rate increase to your annual spending. Which is higher, the savings or the extra sales taxes you’ll pay. If you’re like most Georgians, after running the numbers, you’ll find that your sales taxes will go up more than you state income taxes will go down.

Steve

April 3rd, 2013
1:06 pm

When will people wake up and realize that we have a large group of conservative politicians hell bent on protecting the wealthy, at all costs. What will it take for this to be any more obvious to voters? Can we please stop whining about strawman/false arguments about “Obozo” and look reality directly in the face here?

In the middle

April 3rd, 2013
1:08 pm

C’mon. Somebody should be able to run an analysis to demonstrate the impacts of the tax change.. I would like to see it.

Jay, This is your argument, can you back it up?

Like I said (wd-40′d the box). I will keep an open mind. But it is not enough to just try and infer a correlation on a single data point…I would love to see the math

Erwin's cat

April 3rd, 2013
1:09 pm

in the middle – Do the math and prove you point with actual data and not just conjecture…

From what I can tell…it’ll be a wash.

Peadawg

April 3rd, 2013
1:10 pm

“Why the hell do I love in Georgia?”

I’ll be here until my wife finishes her Master’s degree then we’re out.

Dunwoody Granny

April 3rd, 2013
1:10 pm

“Dynamic modeling”

Here’s how the GOP will explain it when it turns out the tax rate will actually have to be 8-10%: It’s a well known fact (in conservative circles) that corporations don’t actually pay taxes. They simply pass those costs to consumers in the form of higher prices. If we take away that necessity, they will naturally lower prices. Since we know prices are going to fall, we now realize there will be a smaller retail base on which to collect the sales tax. Therefore, we will have to have a higher tax rate than we originally anticipated in order to collect the revenue we need. But cheer up, Citizen! Even though your taxes will be higher, you will almost instantly find that prices are lower!

That’s how the “con” game operates.

getalife

April 3rd, 2013
1:10 pm

Funny, blue States turned red over taxes and no red States are raising taxes.

JohnnyReb

April 3rd, 2013
1:10 pm

Jay – you have more than once demonstrated your economic abilities. So, just one more question. Are you stating that when varying elements of the economy are forecast over time to create a budget it is not a dynamic model?

Steve

April 3rd, 2013
1:11 pm

Don’t need to see the math – it is a tax cut for those that make a lot of money while those who don’t struggle. It would really hit the retired hard…you know, people on fixed incomes who will be paying higher taxes just to live (sales taxes).

In the middle

April 3rd, 2013
1:11 pm

CJ – I did, I pay less.

ev

April 3rd, 2013
1:12 pm

“To better understand the true impact each tax system has upon the consumer and economy at large, consider someone who has $20,000 and must pay income tax. For the example, assume that the tax rate is 20% and that the pretax interest rate on an investment is 5%. After paying income taxes, the individual would be left with $16,000 that could be consumed. Assuming the individual put all $16,000 into savings, they would earn $800 in interest after one year. However, the investor would need to pay $160 in taxes on the interest income ($800 x 20%) leaving him with $16,640, or a gain of 4%, over the previous year.

Under a consumption-based tax system, the rate on consumption is the same 20% as in the income-based system. If the taxpayer consumes every dime, they would pay $4,000 in taxes ($20,000 x 20%) and could have consumed the remaining $16,000 — just like the previous example with the income taxes. However, if the money were saved, then no tax burden would be due and the investor would earn 5%, or $1000, on the full $20,000. All withdrawals are taxed in this system, so if the investor wanted to consume all $21,000, they would owe $4200 and still be able to consume $16,800. This end amount represents a gain of 5%, and is larger than the 4% gain under the income tax system. This system encourages more investment while not creating any tax distortion between present and future consumption.” Investor Guide

UNCLE SAMANTHA

April 3rd, 2013
1:13 pm

THE ONLY WAY FOR GA TO OFFSET THE INCOME TAX REVENUE

HIGHER SALES TAX
HIGHER PROPERTY TAX
HIGHER GAS TAX

ITS THE REASON ONLY 7 STATES HAVE NO INCOME TAX
THEY HAVE SPECIAL SITUATIONS
EXCEPT FOR TENN!….. THEY ARE JUST DUMB

mm

April 3rd, 2013
1:14 pm

The cons won’t realize they are getting screwed on this tax cut for the rich until it becomes law and swims right up and bites them in the ass.

deegee

April 3rd, 2013
1:14 pm

No surprises here. As the GOP gets older and older they consume less. Who cares if they pay 11% on their purchases of Activia and Depends. Their children and grandchildren will be taking it in the gut when they start making big purchases while starting a home and a family.

Steve

April 3rd, 2013
1:15 pm

I grew up in NH with no income tax and no sales tax. But hey, how does that work? Very very high property taxes and tourist/alcohol taxes. You get hit somewhere. At least the poor aren’t hit hard by this scenario as they tend to rent. But they do drink…

larry

April 3rd, 2013
1:16 pm

Why the hell do I still live in Georgia?

Well, the reason i still live here is because i was born and raised here. And i would like the state to get back to where it was , not where it is at now.

The Repubs have raised taxes on the middle class and the keep on raising them. Raise property taxes, done. Raise the cost of staying in a hospital, done. Raise the cost of buying a car from a private party, done. And now the propose to raise taxes by 8 to 10% on everything from food to medicine to car repair. People spoke up a couple of years ago when they to pull the wool over our eyes, and believe me, they will speak up again.

Erwin's cat

April 3rd, 2013
1:16 pm

Don’t need to see the math

A guess is so much better…and easier too

It would really hit the retired hard…you know, people on fixed incomes who will be paying higher taxes just to live (sales taxes).

well considering they pay NO income taxes now, that statement is true

If lower or no corporate taxes will brig jobs to GA, I’d happily pay the extra 4% in sales tax

ev

April 3rd, 2013
1:16 pm

Black market is taxed, drugs are taxed, illegals are taxed, people who don’t pay income tax due to not wanting to pay income tax are taxed.

On the Federal lever, switching to a consumption tax would also lower prices of goods since embedded taxes would be removed.

“Under the current tax system, if I purchase a pair of sneakers for $50, I’m really paying about $60 of my pre-tax money (I’m in a 15% tax bracket (progessive), plus my Social Security/Medicare taxes of 7.5%). Approximately $10 to 12 of the price of the shoes is embedded corporate income tax and tax compliance costs, so already, I’m paying $21 in taxes for that pair of sneakers, and only $40 for the shoes themselves.

Under the FairTax plan, we’ll assume that the manufacturer only drops the price of the shoes to $45 since they don’t have to pay corporate taxes, and their profit can rise by 12.5%. Add the 30% (exclusive) sales tax, $13.50, and my price becomes $58.50, a real savings to me of a 1.50!

How can this possibly hurt anyone, especially the poor or elderly? Even those who are one fixed incomes will see those incomes go farther (*because I haven’t included the ‘pre-bate’ check money) and the seniors who have worked hard all their lives and now want to live off already taxed money will see that money go farther.

The only real losers will be:

The drug dealers who now pay no income tax and spend that money for the bling they love so much. It’s now paying to run the government that is trying to catch them.

The tourists from other countries who will now help fund the US government rather that merely stopping by to enjoy this system that they treat with so much contempt and disdain in their home countries.”

getalife

April 3rd, 2013
1:16 pm

“The cons won’t realize they are getting screwed on this tax cut for the rich until it becomes law and swims right up and bites them in the ass.”

It took jindal to raise the origninal sales tax rate he proposed before they caught on here.

ev

April 3rd, 2013
1:18 pm

“No surprises here. As the GOP gets older and older they consume less. Who cares if they pay 11% on their purchases of Activia and Depends. Their children and grandchildren will be taking it in the gut when they start making big purchases while starting a home and a family.” – Degree

Doesn’t that refute the argument that seniors would end up paying more? Let’s look past the tips of our noses on this one. Short term it may hurt seniors, but people who are not yet seniors will have more money in their pocket that they can invest and have a better retirement.

Steve

April 3rd, 2013
1:18 pm

@Erwin – you still buying the crap that lowering taxes on “job creators” creates more jobs? Why is our unemployment rate so much higher here in Georgia despite all the tax incentives for businesses and lowered tax rates? Why did the job market tank, nationally, when Bush lowered tax rates? Where are the jobs?

larry

April 3rd, 2013
1:18 pm

the propose = they propose

ev

April 3rd, 2013
1:19 pm

@Steve – What is the unemployment rate in Cobb, Gwinnett, Forsyth, and North Fulton? Basically, the well run areas of the city.

Jay

April 3rd, 2013
1:19 pm

“Black market is taxed, drugs are taxed, illegals are taxed, people who don’t pay income tax due to not wanting to pay income tax are taxed.”

I just love the logic at work in that defense of the FairTax. “The black market is taxed” … really? So folks on the black market are going to start charging each other 12% sales tax and sending that to the government?

In the middle

April 3rd, 2013
1:20 pm

Steve, Like so many on this blog that were not around on 911 you probably don’t know what happened to the economy in the days following the attack. The Bush tax cuts were a response to the impacts of 911, not just something to do to fill his day.

Steve

April 3rd, 2013
1:20 pm

we are at 8.3 % ev, and yes, our taxes have been lowered in Georgia to the point where we can’t even afford more police or to pave our streets.

Fred ™

April 3rd, 2013
1:21 pm

Doesn’t really matter what we say here or what is best for Georgia. Those good ol Boy crooks under the gold dome are going to do whatever gets them the most bribe money. Pay off Nathan and the rest is downhill.

Regnad Kcin

April 3rd, 2013
1:21 pm

From the examples above, it seems everyone is going to pay less under the new system.

If everyone pays less, how can this be “revenue-neutral?”

Steve

April 3rd, 2013
1:21 pm

@middle – I’m 46. I was here for 911. What illogic are you spouting? So it made sense to LOWER taxes while we started two wars? Really?

Kamchak ~ Thug from the Steppes

April 3rd, 2013
1:22 pm

Under the FairTax plan, we’ll assume…

Lots of assuming goin’ on with the FairTax.

Assuming it’ll ever get out of committee….