(Updated) Late-hours tinkering means tax bill needs to wait

UPDATE at 11:55 a.m.: I already mentioned this in the comments, but wanted to put it at the top for those just tuning in:

There are reports that the tax bill is being rewritten yet again. If so, this moves the bill out of the “better than nothing” status I gave it earlier.

First, it’s impossible right now to know what’s in the bill. The legislators doing the rewriting are falling into the same pattern we saw in Washington during the ObamaCare debate: keep rewriting the bill to pick up reluctant legislators, and ask the rest of us to trust us that we’ll like it when we find out what’s in it. Until now, there was at least a minimum amount of transparency and deliberation involved. No more.

Second, there were at least sound economic arguments for the differences between the most recent draft of the bill and the original, broader proposal made by the special council. Now, who knows? But it would appear that the new changes are being made to collect “yes” votes, and not necessarily with good economic principles in mind.

All that to say, my reluctant thumbs-up on the earlier, “unexciting, lowest-common-denominator” bill is now a disappointed thumbs-down. Given today’s developments, it seems to me better to hold off, be deliberate and thorough, and revisit the bill next year.

ORIGINAL POST (with original headline “Tax-reform bill is cautious, but better than nothing”):

The state House could vote as soon as today on tax-reform lite — an abridged version of the overhaul proposed earlier this year by a special council of economists and businesspeople. Those broader changes began as potentially significant tax cuts masquerading as a $1 billion tax hike, and have wound up as a lowest-common-denominator bill that hardly anyone is actually excited about.

That said, it’s an unexciting, lowest-common-denominator bill that the Legislature ought to pass the governor ought to sign. Here’s why.

Raising taxes in a slow-to-recover economy is a bad idea, but cutting taxes meaningfully in a slow-to-recover economy has proved to be more than our legislators can bear. If you want to know what they really mean when they talk about smaller government, take a look around — because it has become quite apparent that this is as far as they intend to go in cutting.

They’re not going to cut any farther than revenues require, and the state Constitution mandates that they balance the budget each year, so reducing revenues even further seems to be out of the question.

That has handcuffed the tax-reform plan. The original plan, as it was presented publicly, amounted to an apparent tax hike because the plan described cutting income taxes only to a flat rate of 4 percent (from the current progressive rate schedule that tops out at 6 percent). When some of us hollered about that, members of the special council said they’d never intended for 4 percent to be a floor, but a ceiling. After some further calculations, it was suggested that the rate could drop as low as 3 percent within a few years — eliminating the bulk of the discrepancy, in the minds of highly mobile, job-creating entrepreneurs whom the special council members consulted, between Georgia and no-income-tax states such as Florida and Tennessee.

And the loss of some deductions, raising some Georgians’ taxable income, would be easier to swallow if the rate fell to 3 percent. However, the less ambitious tax plan actually presented to the full Legislature stops at 4.5 percent, because some of the offsetting tax increases have been abandoned.

That leads me to the other key thing that has hampered the reform plan. Some people who say they favor a shift in the tax burden from income to consumption have, surprisingly, balked at doing so the way the special council proposed.

In some cases, they have a point: For instance, legal services in many cases are highly mobile, and it would be simple for clients to avoid paying taxes by requesting that a large firm’s office in, say, Charlotte do the work rather than its Atlanta office. Should that happen often enough, one doesn’t have to go out on too much of a limb to predict that Georgia would lose a lot of legal jobs. Lawyer jokes aside, that wouldn’t be good at all for the state’s economy.

So, there are some legitimate reasons to be gun-shy about some of the proposed changes. But even accounting for those, this remains tax reform lite.

Still, it’s better than nothing and a first step toward further cuts in the near future. The fact that the plan doesn’t include a cut in the corporate income-tax rate — a central campaign promise of Gov. Nathan Deal — suggests strongly that we’ll see lawmakers take another whack at the tax code sometime in the next three years.

In the meantime, I say we pocket the small gains on the table now — and go for more as soon as possible.

– By Kyle Wingfield

Find me on Facebook or follow me on Twitter

70 comments Add your comment

Aquagirl

March 30th, 2011
5:55 am

I wish the HERO unit guys had a lobby. Raise car repair rates and they’ll be busy with more broken-down clunkers blocking traffic. Things like that make me wonder if they’ve really considered what this bill will do.

Notice of Income Tax Increase

March 30th, 2011
6:30 am

Better than nothing… for the very top and the very bottom perhaps. If you itemize, and are middle-class, this proposed tax bill is harmful to your family and your church/your charity of choice. Between the net income tax hike and new satellite television sales tax, the middle-class (ones that itemize… have been faithful to their church… have been responsible and paid their mortgage) gets their taxes hiked.

If you’re middle-class.. and itemize (have a mortgage and help support your local church/charity)… let your state legislator know your views about these proposed changes…

Karl Marx

March 30th, 2011
6:39 am

Better that nothing? A step to more cuts in the future? I remind you about the NEVER ENDING GA 400 toll. Once a tax is in place they ill never give it up. They will cut nothing. How about cutting more unnecessary government spending and slashing more bureaucracy. They are still funding the Arts Council. This is nothing more that a tax increase from Republicans who lie when they say the are for Smaller Government and Lower Taxes. I’d vote for the Economy because it is the only thing that has actually reduced the size of the Monster (Government). Kyle your no conservative.

A Frank Zappa

March 30th, 2011
6:45 am

I imagine it must be quite painful for anyone that voted for the party of tax cuts and smaller government to see them take such an opportunity and just squander it. They couldn’t even handle the most basic concept of implementing a revenue-neutral fairer tax by doing such things as taking the taxation from the rich and giving the taxation to the poor through the use of a state-wide grocery tax. After all, what could possibly be fairer than a tax on food and it should be a simple tax, a tax based on weight so the more you eat, the more you pay. The same goes for restaurant food. Why should Big Macs be treated differently. Put all food on a scale, drinks too, and tally up a weight tax. Instead, we get, like Kyle said, nothing real. A fairy tax. They talked the good bedtime story during the campaigns but when it came time to do something substantial, to finally make a stand, they came, they ate, they farted. Now it’s time to pass the gas and head home. Their work is done.

DeborahinAthens

March 30th, 2011
6:55 am

What is it with the tax cuts? I am sixty years old, and I am in the highest tax bracket. I, for one, miss living in a country that has paved roads, good schools for everyone, services that keep the old and the poor from suffering. When I need a police office, I hope one is available. If my house catches on fire, I hope the fire department arrives in a timely manner. I was a Republican for my entire life (voted for Nixon twice, voted for Reagan twice) until George W. Bush ran for office. When George W. Bush started beating the drums about tax “reform”, I told everyone that would listen–as did his own Treasury Secretary that the lower tax rates would bankrupt the country. I told anyone that would listen that the Bush combo of lower taxes, two wars, Medicare Part D would turn this country into a Banana Republic. And so it has. The 3% difference between my tax rate now, and my tax rate during the Clinton administration was not onerous. For those in the middle brackets, I would hazard a guess that they wouldn’t even notice the difference. Most folks can’t even tell you what they pay in taxes. I drove into Atlanta last week and I-85, around the Clairmont Rd. exit is crumbling. Our port in Savannah needs to be deepened to make us competitive, and there is no money for that. You people have not one shred of evidence that lower taxes bring jobs, yet you sing that tune ad nauseum. Meanwhile, the state of Georgia is at the bottom of education, job creation–everything except an excess of religious right wing idealogues that are intent on controlling our lives. I will most likely never vote for a Republican again in my lifetime, because it is obvious that most Republicans have only one thing on their agenda–destroy the very fabric of this country. You are a party with no ideas other than destroying the middle class. At that, you are, unfortunately, too successful.

Monty

March 30th, 2011
6:57 am

Georgia Republicans have been raising taxes since they gained power 10 years ago. The sad thing is that Georgia voters are so gullible that they keep voting for the party of tax increases.

BOB FROM ACCOUNT TEMPS

March 30th, 2011
7:14 am

if you lower income tax rates and add sales taxes on things that people use most, only a politician would think he/she has done something good for the people. math scores must have been low when these guys were in school too.

The Hell You Say

March 30th, 2011
7:34 am

The AJC is bought and paid for by the power brokers here in Georgia. That’s why our colleges are probably the biggest advertisers here in Atlanta. Keep up the good work, there is a place waiting for you mercenary sell-outs.

David

March 30th, 2011
7:41 am

Deborah in Athens speaks my mind.

ragnar danneskjold

March 30th, 2011
7:50 am

As a former Tennessean now working in Florida, I assure you I can tell the difference between a 3% income tax and a 0% income tax.

Our lawyer-dominated legislature lacks creativity. If you want to raise state revenues, why not create a 98% “tax” on punitive/exemplary damages, or a 25% tax on “noneconomic” injuries? That would have the twin effects of reasserting the state’s sovereign role as the punisher of evil acts, and discouraging the legal scams that worthlessly punish the job creators in our state.

There are numerous economically-productive revenue sources available to the state, in the form of excise taxes against uneconomic activities. Most of those would interfere with the money-machines of the overlords.

JOJO

March 30th, 2011
7:51 am

WE ARE BEING TAXED TO DEATH. ENOUGH OF THE CRAP. WHY CAN’T THEY STOP SPENDGING. BETWEEN THE FEDS, STATE OF GEORGIA, CITY ,FULTON COUNTRY AND ON TOP OF THE AUTO PERSONNEL PROPERTY TAX AND TAG IT’S GETTING HARDER AND HARDER TO LIVE. I FOR ONE ARE TOTALLY FED UP WITH THE MONEY HUNGRY POLITICALS. THIS COUNTY IS BEING DESTROYED .

Buzz G

March 30th, 2011
7:59 am

Debora,

You should move to Cuba or Venezuela or maybe even North Korea if you love government goodies so much. We have indeed become a society addicted to government goodies.

The Republicans are bad. But Democrats are worse. Where is the Tea Party when we need them?

Aquagirl

March 30th, 2011
8:16 am

Police and roads are government goodies? You’re one hard-core Tea Partier, Buzz.

A Frank Zappa

March 30th, 2011
8:20 am

Ragnar peddles his wares in Florida but wants to tell us in Georgia what we should be doing. Typical conservative. He should be required to pay an out-of-his-state blog post tax.

Fletch

March 30th, 2011
8:21 am

Yaaawwwnnn……Nothing new here. The sheep voted for their favorite shepard, and are once again amazed that the shepard didn’t fulfill his promises. I’ll be impressed when I see the headline, “Elected Officials Uphold Campaign promises”. Until then, it’s all just the same noise from the Left and the Right.

Stonewall

March 30th, 2011
8:28 am

I wish they would call it what it is… a tax increase. My personal income tax goes down 1.5% but they add a 7% tax to satellite TV. That is a 5.5% increase and that does not count the new taxes on services that are being added.

Zedd

March 30th, 2011
8:30 am

Any politician from my district that votes for this shell game under the guise of a tax cut will not receive my vote next time they are up for election and I will recommend to everyone I know to do the same. First it was property taxes, mill rates, home owners insurance rates and a bogus trash plan here in Gwinnett. Now gas and groceries prices are going through the roof. Quit increasing the tax burden on middle class and poor or face the consequences!

DOR Tax Collection Man

March 30th, 2011
8:34 am

We are so excited because now more businesses will file lots more paperwork to send in all the taxes.

Then we will send our DOR auditors to check their paperwork requiring the business owner to talk to his accountant. The accountant charges more to correct the paperwork. The interest and penalties will pay for the new employees at our office.

More new hires at DOR and increased billing for accountants. This is how the Georgia Republicans will save or create new jobs.

NO GOP Tax Increase

March 30th, 2011
8:37 am

Better than nothing? The republicans are raising taxes, where is the outrage?

Adding the new sales tax to goods and services will shift the tax burden to the middle class and poor. We all know goods and services will become more expensive, then you have only two choices – pay more in taxes or do without the things you need.

Great – standard operating procedure for the corrupt GOP – the rich get a big tax break and the rest of us pay their share!

@@

March 30th, 2011
8:39 am

Gov. Nathan Deal — suggests strongly that we’ll see lawmakers take another whack at the tax code sometime in the next three years.

Next three years!!??!!

That’s right around election time when political promises are sold at a “discount”.

Oh well, they get an “E” for eking out.

@@

March 30th, 2011
8:42 am

NO GOP Tax Increase:

The republicans are raising taxes, where is the outrage?

Unlike left-wingers, GOP voters aren’t prone to hysteria.

A Frank Zappa

March 30th, 2011
8:44 am

The only truly fair way to implement a state consumption tax is to tax toilet paper and to only allow the sale of state toilet paper, made from pulp that was cut from state forests. It’s the stately thing to do.

Just the Obvious

March 30th, 2011
8:47 am

This whole exercise is to put a tax to person-to-person car sales to discourage this activity and so dealers would rule the used car business. Estate to for your old car, not when it dies but just moved out.

A Frank Zappa

March 30th, 2011
8:48 am

Unlike left-wingers, GOP voters aren’t prone to hysteria.

They’re so accustomed to being lied to by their Republican leaders. It’s passe. “Yawn,” they say, when confronted with yet another Republican lie. They have no dreams left to quash.

1961_Boomer

March 30th, 2011
8:51 am

I am middle class, and I itemize. This represents a nearly 30% tax increase for my family over the current state income tax.

Karl Marx

March 30th, 2011
8:54 am

WELL there seems to be a little hidden provision buried in the bill on “Grain Dealers” and “Agriculture Producers”. This smells more like another Sonny Do list. You know the one where Sonny does us all. News flash: State Republican have changed their name to Republicrats to more closely represent the people who jumped ship from the Democratic Party. Likewise the Democratic Party will now be known as Democans.

A Frank Zappa

March 30th, 2011
8:56 am

I’m just going to start planting my cars in my front yard when they die with their tail ends sticking up out of the ground and the trunks wide open as a sign of protest to the Republican’s latest tax on the less than wealthiest. My dead cars will moon you. A moon zappa back at ya, Republican losers.

ragnar danneskjold

March 30th, 2011
9:00 am

Dear Frank @ 8:20, good morning, you have just learned the economic rule called “unintended consequences.” Most of the rust belt is learning that rule along with you.

Wyle Kingfield

March 30th, 2011
9:07 am

Don’t fret over higher taxes. It’s the cost of doing business under the Gold dome. At least we all want to get rid of Mexicans and we really, really love Jesus. Enjoy that T.V. Y’all.

findog

March 30th, 2011
9:22 am

Counter Point:
Rewarding bad behavior by our duly elected legislature by providing political cover from our supposed local conservative pundit is an abhorrent abandonment of the chair you now hold. Any corporate titan will tell you that eighty percent of the time a no-decision is the right decision; for Georgia this is one of those times.

DebbieDoRight

March 30th, 2011
9:26 am

You people have not one shred of evidence that lower taxes bring jobs, yet you sing that tune ad nauseum. Meanwhile, the state of Georgia is at the bottom of education, job creation–everything except an excess of religious right wing idealogues that are intent on controlling our lives. I will most likely never vote for a Republican again in my lifetime, because it is obvious that most Republicans have only one thing on their agenda–destroy the very fabric of this country. You are a party with no ideas other than destroying the middle class. At that, you are, unfortunately, too successful.

Yeah! What she said ^^.

DebbieDoRight

March 30th, 2011
9:29 am

I heard on television, from the republican who introduced the bill, that the state of georgia was trying to be more aligned to their neighbor to the south (Florida), which doesn’t have state taxes. I wonder if the repubs failed to realize that tourist revenue makes up for the loss of state taxes in florida. Hmmmm Do you think they’ve actually thought that part through? Naahhh…….I doubt it.

findog

March 30th, 2011
9:31 am

Dear Notice,
I know in Leviticus the bible gives the account the threshold of ten percent for God. In Matthew Jesus allowed that the state might have a rightful claim to some of those same fruits of labor and Romans specifies that you pay your taxes. I just have not found the verse that stipulates that charity is a recognized tax deduction, nor a church a tax free entity. Could you offer a reference at least 2,000 years old?

findog

March 30th, 2011
9:45 am

rd @ 7:50
I do not agree with taxing awards; but Georgia must legislate some form of moderation in ambulance chasing awards with real caps

@@ at 8:42
What would you call the Tea Party?

Aqua
The road I drive on to work is fine with very little congestion so therefore there is no need for transportation improvements or taxes; unless of course it need to be repaved and widened then the Federal Government should come in with a TIGER Grant to pay for it at no cost to me.

Kyle Wingfield

March 30th, 2011
9:53 am

Stonewall: Unless you spend as much money on satellite TV as you make in income — and if you do, I think you have bigger problems — then your math is way, way off.

I think there’s a lot of misunderstanding out there about what exactly would be taxed after this reform that isn’t taxed now. You basically have one entirely new area: auto repairs. Whether that’s a good idea is debatable, I suppose, but it is the *only* entirely new service that is being taxed under this plan.

Beyond that, you have some attempts to level the playing field. Right now, if you have cable TV, you pay tax to the state; if you have satellite TV, you don’t. If you buy a used car from a dealer, you pay sales tax; if you buy one from your neighbor, you don’t. This bill eliminates those discrepancies, which effectively are a way of picking winners.

Now, could they have eliminated the tax on cable TV, used-car sales by auto dealers, and so on as a way to level the playing field? Sure. But to me, it’s preferable to lower taxes on income instead.

carlosgvv

March 30th, 2011
9:55 am

Tax reform to the Republicans means lowering Corporate taxes and raising them on the middle class. They will disguise this in legal double-speak but serving Big Business is their number one priority.

[...] AJC columnist Kyle Wingfield also discusses the bill and his perspective is that an imperfect bill is better than no bill at all. Kyle puts it this way: [...]

Sales Taxes are Regressive

March 30th, 2011
10:06 am

At the risk of sounding like a broken record, the Party of tax cuts is really the Party of tax cuts for the wealthy and the Party of tax hikes for the poor and middle class.

While cutting corporate taxes, flattening income taxes (that is, eliminating the higher rates that apply to the wealthy), and eliminating taxes on unearned sources of income which primarily benefit the wealthy (that is, taxes on inheritances, capital gains, and dividends), our representatives are replacing the lost revenue with higher taxes on the poor and middle class (sales taxes).

Ladies and Gents: Your 21st century Republican Party.

jconservative

March 30th, 2011
10:07 am

From the Georgia Tea Party types as quoted in the AJC this AM:

”One can not just look at the tax rate cut, one has to look at the deductions/exemptions that are slashed and, in many cases, removed in this bill. Taxes will be raised for some and will be cut for others. In other words, this bill re-distributes wealth.”

In other words this bill is a Tax Increase for some. And if it is a Tax Increase, then it is a Tax Increase. A Tax Increase by any other name is still a Tax Increase.

As I have observed frequently for 31 years the US as been obsessed with taxes. And for 31 years the US has ignored spending. The result is a $14.4 trillion National Debt.

If all we do for the next 10 years is play with taxes the National Debt will continue to grow.

Jefferson

March 30th, 2011
10:20 am

Bad idea, not better. Shift the tax burden away from the well heeled. Better would be progressive rates up to 8% based on income.

A Frank Zappa

March 30th, 2011
10:25 am

Stonewall: Unless you spend as much money on satellite TV as you make in income — and if you do, I think you have bigger problems — then your math is way, way off.

He used statistics in the same manner as your typical Republican would — as an end game to a means. Cato, Heritage Foundation, et al, do it all the time.

old timer

March 30th, 2011
10:28 am

I am a formaer Georgian, now living in TN….Love the low property tax and no state taxes….makes a big difference in retirement.

Kyle Wingfield

March 30th, 2011
10:38 am

At the risk of sounding like a broken record, Regressive, you have no idea what you’re talking about here. This bill does not lower corporate income taxes — just some taxes on business inputs, which economists of all ideological stripes agree is a sound idea, and most of which are not taxed in the states we compete against. The bill does flatten personal income taxes, but unless your definition of wealthy is someone who makes $5,000 a year — the starting point in Georgia for the “higher rates” of 5 percent and 6 percent that are being eliminated here — you’re off-base with that, too. This bill does not touch taxes on inheritances, capital gains or dividends. And it adds a sales tax to exactly one new area: auto repairs.

It’s pretty obvious when someone applies the same talking points to any situation, regardless of the facts.

Hillbilly Deluxe

March 30th, 2011
10:41 am

I’ve lived in Georgia all my life and I’ve seen this scenario time and time again. We go through an economic downturn and the State gets short on money, so they raise taxes in some way. Then in a few years, the economy picks back up and starts doing well. Do they cut the taxes back or put money up for bad times? Of course not. They look for new ways to spend the “surplus”. So in the periods while they are raking in the dough, they spend every bit of it. Then when the economy turns down again, every new thing they’ve been spending on becomes a sacred cow and can’t be cut. So the cycle repeats over and over. It’s an excalating spiral.

I remember a time when you paid 3% sales tax in Georgia. Now, with all the SPLOST’s, etc, in most areas it’s 7%. Anyway you look at it, that’s over a 100% increase. Things cost more now sure but they also have an exponentially larger tax base than then. 7% is always more than twice 3%, no matter the size of the whole. They are taking a much larger slice of the pie.

The truth is, this is a tax shift. Shifting the tax burden from one group to another.

I do not agree with taxing awards; but Georgia must legislate some form of moderation in ambulance chasing awards with real caps

Georgia passed tort reform legislation in 2005. Did anybody see anything change? I didn’t.

Kyle Wingfield

March 30th, 2011
10:48 am

Word is that the bill is being rewritten yet again: http://bit.ly/exFr9J

If so, I may just give up on this bill for this year. At least there were some sound economic arguments for making the first changes from the original proposal. Now, if the above report is accurate, they’re just moving into obvious vote-collecting mode, ration and rules for drafting this bill be damned. That’s when you wind up with bad legislation.

This is going from Tax Reform to Tax Reform Lite to Tax Reform Surprise.

Jefferson

March 30th, 2011
10:52 am

Why not tax employee’s labor like your own there Kyle? Say the AJC has to pay sales tax on your paycheck, you pay your income tax like the hairstyler would have to. How would that work out when you wanted a raise, they would just say “I just had to pay more for you !!!” Progressive income tax is the best way to raise revenue, quit kissing up to your money loving idols.

Sales Taxes are Regressive

March 30th, 2011
11:03 am

KW,

For the record, I did not say corporate “income” taxes, I said corporate taxes.

And to be clear, my comment was not limited to this legislation. It describes a trend, well documented and obvious to anybody who is paying attention, marketed and implemented by Republican legislators and Governors in this state and in many other states, and among legislators and former Presidents and Vice Presidents at the federal level.

The comment is true and this legislation is further implementation of a long-term plan: Cut taxes for the wealthy. Make up lost revenues on the backs of the poor and middle class.

Sales Taxes are Regressive

March 30th, 2011
11:15 am

By the way, the notion that corporate taxes are the be-all and end-all for companies deciding where to locate their operations is a myth.

Of course, different companies have different criteria and many factors come into play, but among the top factors are infrastructure, the quality of the education system, the quality of the available workforce, and yes, the cost of health insurance? States with lower business taxes lose opportunities all the time to states with higher business taxes or countries with higher business taxes because other factors were determined to be more important, and ultimately, lowered direct costs to the business in the long-run.

jm

March 30th, 2011
11:26 am

They should have applied the tax to groceries again. Not doing so was stupid, inefficient, and if you want to help the needy, there are more efficient ways of doing so.

Ergo, they couldn’t drop the rate more. Politics….

@@

March 30th, 2011
11:42 am

findog:

@@ at 8:42
What would you call the Tea Party?

Determined.