(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
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70 comments Add your comment
Rhee Hung the Moon? Think Again.
March 30th, 2011
11:49 am
I usually prefer to stay within spitting distance of the topic at hand, but the lack of a new thread by KW on this issue means that I have to deviate from the norm.
The beltway media has been singing the praises of school reformer and anti-union crusader, Michelle Rhee. In addition, KW wrote a post proposing that the City of Atlanta replace Beverly Hall with Rhee, explaining why she is the greatest thing since sliced bread. But Rhee’s impressive results, it turns out, are possibly (likely?) a mirage.
So, given his previous post about Rhee, I’m hoping that KW will give us an updated post with the same level of scrutiny that he had applied in his posts about Superintendent Hall.
http://www.usatoday.com/news/education/2011-03-28-1Aschooltesting28_CV_N.htm?loc=interstitialskip
findog
March 30th, 2011
11:50 am
@@ One woman’s hysteria is another man’s determination
A Frank Zappa
March 30th, 2011
11:57 am
The Republican’s best bet at this point is to highlight something about abortion and maybe even throw in some words about secession. Then, follow Del’s lead and lay low for three years until it’s time to campaign again. By then, all will be forgotten and thus forgiven.
A Frank Zappa
March 30th, 2011
11:58 am
Oops. That should have been “Deal’s lead…”
Karl Marx
March 30th, 2011
12:06 pm
“But to me, it’s preferable to lower taxes on income instead.” Sure yea, just like they promissed to remove the GA 400 toll booths as soon as the road was paid for. I would support a tax on services as long as they ELIMINATE income taxes. Of course that will never happen, not with this bunch of Bozo’s Mr. Wingfield.
@@
March 30th, 2011
12:16 pm
Ragnar:
I’m curious.
Taxing the “punitive/exemplary damages”. Would that applied to “the turnip”, the insurance company or the lawyer? Same thing with “non-economic injuries”.
OR
Do you see that as an incentive that draws business to Georgia.
I’m finding myself saying this a lot…”I’m askin’ ’cause I don’t know.”
(ISH)
Holly
March 30th, 2011
1:05 pm
The rule should be – no new taxes until spending is cut 10-25%!!!
jm
March 30th, 2011
1:13 pm
WHAT HAPPENED TO THE UP OR DOWN VOTE OUT OF COMMITTEE? These turkeys don’t even follow their own rules.
ragnar danneskjold
March 30th, 2011
1:44 pm
Dear @@ @ 12:16, good afternoon, apologies for sloppy writing. My intention was that an award of punitives and/or other noneconomic damages would be taxed to the arguing attorney (effectively leaving the attorney and client a 2% reward for collection of a penalty and 25% for noneconomic damages.) I think true economic damages ought not be taxed except as appropriate under general income tax laws.
What are the incentives of such a program? It works as a strong disincentive for non-meritorious cases – eliminates the lottery wheel in litigation. The likely change in the corporate climate would make the state attractive to job-providers. And yet, for those truly egregious cases – really rare – the traditional remedy – jury trial – is still in place.
ragnar danneskjold
March 30th, 2011
1:47 pm
Dear @@ @ 12:16, the inside info (outside your experience) is that the plaintiff attorney collects all rewards, then after keeping his cut makes a payment to the client. As the attorney holds all the money, he/she is the appropriate target for the tax.
1961_Boomer
March 30th, 2011
2:59 pm
It has occurred to me that the major problem with all of these types of tinkering is this:
In an attempt to raise tax revenue overall, states want to lure wealthy taxpayers to the state. It is CLEAR that the wealthy are fleeing high-tax states for lower-tax states. State legislatures believe that the biggest draw is a low state income tax. In order to lower a state’s income tax, states must find revenue neutral offsets elsewhere. They must also be mindful that the poor have very little discretionary income, and their taxes must remain nearly the same. An extra $400 is a large burden on someone making minimum wage. The net result is that all revenue neutral attempts to lower income tax causes offsets that fall squarely on the shoulders of the middle class.
From a revenue standpoint, this is good business. It is not likely that someone making $60k-$160k a year is going to move to another state in order to escape an extra $400 to $2000 in tax, and it is likely to attract at least a small number of the very rich to relocate to Georgia.
But that $400 to $2000 (in my case, it looks like about $1000-$1200) is a HUGE amount to someone making that money. That is a vacation to the Georgia coast, or tires for the car, or paint for the house. That is a major purchase that the middle class will lose every single year. It represents an eroding standard of living in a time where wages are stagnant.
Would this be good for the Georgia budget? Yes.
Would this be good for the budget of about 1 million middle class households? NO.
@@
March 30th, 2011
3:01 pm
Ragnar:
The attorney? That was the impression I got, so NOT sloppy, just needed clarification.
And to think…the AJC’s leftist bloggers see you as narcissistic, condescending…arrogant even.
Ragnar Danneskjold, self-sacrificing champion of free enterprise from which everyone stands to gain.
Good for you!
(ISH)
Now tell me, what is your opinion of Luis Fortuño? Don’t hold anything back. Your honest assessment.
jconservative
March 30th, 2011
3:32 pm
Kyle I trust you are learning that, whether it is controlled by Democrats or Republicans, you cannot trust the Georgia Legislature as far as you can throw their combined weight.
Now the baptist are opposed to the bill because it will tax their tithes.
But bottom line, the bill raises someone’s taxes.
@@
March 30th, 2011
4:25 pm
jconservative:
I don’t claim my charitable giving (tithes and the like). Too much paperwork.
Not here to tell people whether they should or shouldn’t. Some people, however, may look to reduce the amount of tax by reducing their charitable giving, which, in turn, hurts the recipients of said charity.
I’m just guessing here.
Peter
March 30th, 2011
4:53 pm
Here in Georgia we are taxed in unusual ways….they call them Fees.but they don’t use the fees for what they say they collect them for……another Republican Lie.
Like the GA 400 TAX….or the tire fee.
Problem is special interests like Sonny’s fish farm, and buying public land that is over priced, is the way of Republican’s. Imagine property and land has dropped to 1999 levels around most of the state yet, they pay a premium with our tax dollars so a few can get rich.
But hey having the Republican’s in control, is like guarding the hen house with a fox. Similar to “Cost Plus Contracts”…..the cost plus is paid for by the citizens.
ChuckDoberman
March 30th, 2011
4:59 pm
Use Fla. as a fiscal example?!! Wow… since moving here from Fla 18 months ago I’ve learned that lots of folk up here are… challenged… in the areas of original thinking and personal judgement (among other things) but FLORIDA???!!! I was there. For 20 years I maintained a small business and provided approx 60 people with employment that paid decent, middle-class salaries despite the hurdles and roadblocks thrown up by every legislature since Jeb was first elected. I witnessed the exponential growth of local and state gov’t guided by “the party of small gov’t”, whom also waged a vicious and successful war on the middle-class and small business owners. I saw their legislative “leaders” base Fla’s economy on 2 things: Tourism and housing. The bubble burst early in Fla (late2005/early 2006 by my observance) and soon after that everywhere else, thus greatly constricting the flow of tourists. The result was as predictable as it is evident today. Florida is stagnant and dying and still their “leaders” push the same policy year after year. (and why not, legislating is apparently VERY lucrative despite the economic disaster they live in, and the process of creating new legislation that enables and enriches the legislators is not a difficult one given the vast majority of active voters are seniors and self-professed conservatives who swallow whatever their “conservative” (lmao) feed them hook, line and sinker with little or no resistance regardless of the fact that much or most of it is AGAINST their personal well-being and benefits VERY few. I used to feel that this line of thinking (or lack thereof) was isolated in Fla and couldn’t possibly be as predominate anywhere else. Moving here has changed that. Much like Deborah in Athens (whose post I completely agree with… Deborah please run for office) I used to consider myself a lifelong republican, yet after forcing myself to open my eyes and admit the truth I will never, ever feel that way again. PLEASE, DO NOT USE FLORIDA AS AN EXAMPLE… FOR ANYTHING. Those that are able are leaving there as quickly as possible, and those that are unable are stuck in a backward state with poor governance, no representation, TERRIBLE schools (the Fla repubs will abolish public education FIRST in Fla, leading other states deeper into desparity for most as they so often do) and NO JOBS. If things get much worse the Cubans will return to their homeland in search of greener pastures… another unexpected plus for republicans… until they understand that soon there will be noone left to provide them services
I Report (-: You Whine )-: Thee Magnificent!!! mmm, mmmm, mmmmm! Just sayin...
March 30th, 2011
5:13 pm
Kicking the can down the road, just sayin…
I Report (-: You Whine )-: Thee Magnificent!!! mmm, mmmm, mmmmm! Just sayin...
March 30th, 2011
7:21 pm
MediaMatters has a staff of 90 putting this stuff out, Politico reports. “It’s horrible,” a MediaMatters employee told Fox’s “Red Eye” last month. “All we do is sit and watch Fox News and make up stuff about Fox News. It is the saddest place I have ever seen in my life. I think about it, and I want to throw up.
Believe me, normal people do puke when they hear Media Matters.
ew
Thomas
March 30th, 2011
8:14 pm
Bureaucracy is very expensive!
Lugnut
March 31st, 2011
8:40 am
Its a tax increase. The Republicans for convenience sake are behind it. Write down their names. Remember them. Vote them out – no matter ther outcome of this debate. VOTE THEM OUT.