Where things stand now on Georgia tax reform

Here’s what I’m hearing as far as the possibilities for a tax-reform bill this session:

  • Option 1 is the bill I discussed yesterday, which came out of a joint House-Senate committee. House Democrats say this would result in a tax increase for taxpayers earning between $20,000 and $180,000 a year. House Republicans counter that the only increase would be for about one-third of those earning between $80,000 and $140,000 a year.
  • Option 2 is designed to address the Democrats’ criticism by changing the phase-out of itemized deductions that would have led to the tax increases described above. House Republicans say the result would be that 90 percent of those in the $80,000-$140,000 bracket would see no change or a tax cut, and that the overall plan would amount to a tax cut of $150 million to $200 million. As of last night, however, I was hearing different things as far as whether there was a fiscal note to accompany that plan and back up the House Republicans’ claims.
  • Then there’s Option 3, by far the worst of the lot. This plan, which I understand came from some Republicans in the House who were reluctant to go for either of the first two options, would strip down what I’ve called Tax Reform Lite to what I’ll call Tax Reform Zero. It would entail only the exemption on energy inputs for manufacturers and farmers, and a reduction in the personal income-tax rate of — wait for it — one-quarter of one percentage point. That’s right: What’s now a top rate of 6 percent would become a flat rate of 5.75 percent.

So, what we have here is a Republican-dominated Legislature that was handed a plan to reform our tax code to make it flatter, broader, simpler and more competitive — including a component to cut the personal income tax as low as 3 percent, or half the current top rate.

And some of them — legislators who call themselves Republicans, mind you — would prefer to keep your taxes almost twice as high, at 5.75 percent.

I can’t imagine why they would even bother with such a plan. Even the House Democrats wanted to cut taxes further than that.

I stick with my position from yesterday: That Option 1 was better than nothing, but that the rush to tweak the plan here and there is not appropriate for an issue that could substantially affect all Georgia taxpayers. Lawmakers need to be certain — as certain as one can be about tax reform and its effects — that they are making the system better rather than worse.

At this point, it would be most prudent to shelve the plan until next year’s session. Or, possibly, the special session that will be called this summer to deal with redistricting — but only if the plan is worked on thoroughly and transparently between now and then, and not dropped in legislators’ laps as a surprise.

But legislators definitely had better not try to get by with Option 3 and sell it as the kind of “tax reform” they promised.

– By Kyle Wingfield

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43 comments Add your comment

the original and still the best John Galt

March 31st, 2011
10:50 am

I agree that it’s better to wait until either the special session or next year. The legislature passing this cobbled-together mess in any of its possible forms would be a disaster.

retired early

March 31st, 2011
10:53 am

Kyle

There is no “top” tax rate, it is 6% of taxable income regardless of income level. What I am anxious about is this eliminating Itemized deductions. Fed’s current standard deduction is $11,500 for MFJ, while the state’s is only $3000. How do they plan to make up for this disparity.

Road Scholar

March 31st, 2011
11:01 am

Kyle, everyone would like a tax rate of zero, but what do we need to properly run this state? Shouldn’t we be looking at all programs and discard or change the ones that need mending….and then look at what tax rate is needed to fund that level of government? Not just cutting taxes or programs but identifying what is needed? I agree that the bill should be tabled now. If it is a special session, no daily stipend for the legislators. The citizens have had to do with less; let’s put that same requirement on the special session. Moving faster is…when fools rush in.

Kyle Wingfield

March 31st, 2011
11:13 am

Retired early: Actually, we have six brackets…it’s just that the top one, at 6 percent, starts at only $7000 of taxable income. The proposals would all create a flat rate. But that is not what we have now.

1961_Boomer

March 31st, 2011
11:28 am

A repeat of what I wrote yesterday: 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 in the middle class? No!

Kyle would not mind at all taking an extra $1000 from me every year if it means that the income tax rate goes down. How nice of him. I guess I would have to consider if the exemptions allowed only really benefit the upper middle class (I don’t consider $100k per year to be rich, but it is certainly not lower middle class). This IS a shift in the tax burden from the wealthy to the middle class without a guarantee that the state would, in fact, attract higher income wage earners and bring the state more revenue. If that did not happen… if the wealthy do not move to Georgia and start paying taxes… then this would have a detrimental effect on the state economy by taking about $500 million in spending ($500 increased taxes on 1 million filers) out of the state economy and giving it to those who are rich. This is a gamble, Kyle. The state is gambling the with the economy of Georgia and the discretionary spending of the middle class in order to bring in more revenue. If successful, then Georgia broadens it’s tax base. If it fails, the state sees no new revenue, $500 billion in spending in Georgia is lost, and middle class is weakened.

that's goofy

March 31st, 2011
11:29 am

I’m for tax cuts – but I also worry about funding services. As it is – GA (and US) offer tax breaks to corporations in order to create jobs and stimulate business. Many of those corporations then outsource jobs to other countries. I’d like to see that loop hole closed.

We want better schools, roads, police/fire and healthcare but how are those things paid for?

Just the Obvious

March 31st, 2011
11:45 am

When you trade-in your car to dealer, you only pay the tax on the difference in prices between old and new car. The government gave you a tax credit for your old car. When you private sale, no tax credit given and your transaction will be taxed. I can’t find anything more unfair than government using the tax system to give dealers an unfair advantage to benefit from the taxpayers.

retired early

March 31st, 2011
12:04 pm

Kyle

So for everyone with a taxable income of $7000 or more, the more important question is how do you address the disparity between the Fed standard deduction of $11,500 and the states’s $3000.
It occurred to me that if everyone had to claim standard deduction…with this elimination of itemized deductions everyone who’s taxable income exceeds $7000 will now be paying more taxes.
If before this change I claimed $12000 itemized deductions, now, I pay the difference between $12000 and $3000…which is $9000 X 4% or $360. How is that gonna work.

GTT

March 31st, 2011
12:19 pm

You’re not Thinking Right, Kyle. Wooten would talk himself into liking any of the flawed plans, as long as they came from the GOP. :> Actually, you are a true non-partisan conservative.

itpdude

March 31st, 2011
12:23 pm

ha ha ha, the GOP, as usual, can’t abide by the facts. It took screams from the TP and Dems to actually address the FACTS presented by a respected economist at GSU.

This is going to raise taxes on some people, but not the richest people (who have been getting dramatically richer in the last 30 years). The wealthiest get a cut.

What a joke.

Aquagirl

March 31st, 2011
12:27 pm

If they go with option 3, the can please both their corporate masters and the sheeple, whom they can tell “I voted to cut taxes.” The idiots who think Republicans actually cut taxes will re-elect them by an overwhelming margin.

Yep, smart money is on option # 3. It’s best for the politicians and corporations. It’s the Republican way.

retiredds

March 31st, 2011
12:32 pm

Kyle, I agree with you that it would be best to wait and do it right. But these guys have to go home and brag about something even if it messes with the middle class. It is purported to create jobs (the jury is out on that) so it will get done, even at the stroke of midnight, because anything that creates jobs is “good”.

bob from account temps

March 31st, 2011
12:42 pm

nothing would be better than what is proposed

Rob

March 31st, 2011
12:45 pm

Any plan that does not lead towards either a full income tax or full sales tax results in a loss of tax deductibility on Federal tax return, and therefore increases total taxes paid by the individual. Filers must choose EITHER income tax or sales tax to deduct. Shifting the load between the two types and a mix of fees only increases the financial burden on Georgians.

jconservative

March 31st, 2011
12:50 pm

So much for the tax plan of the Special Committee.

As Alice pointed out:

“If it had grown up, it would have made a dreadfully ugly child; but it makes rather a handsome pig, I think.”

INC

March 31st, 2011
12:54 pm

Any tax “reform” that increases taxes is worthless. Under this system I can at least predict how much my 2011 taxes will be.

jm

March 31st, 2011
1:34 pm

Sounds like there are some RINO’s running loose in GA.

scrappy

March 31st, 2011
1:38 pm

“House Republicans counter that the only increase would be for about one-third of those earning between $80,000 and $140,000 a year”

This is the “counter”, as in, what is supposed to be good? OMG!!!!! So long middle class….no one cares about you.
1961_Boomer is exactly right, this is a huge amount of money to me, smack in the middle of that range. When will people who keep voting for these Republicans please wake up?!?

Lets bundle some of today’s stories together and see what we have: 1-US companies profits higher, but aren’t hiring. 2-Collective Bargaining rights removed / union busting. 3-Only raise the taxes of the middle class in order to make nice to the really rich people (because only rich people hire people!) –see point 1

New Republican way of life in the US is about to become one where there are no unions (no pensions, no social security) workers will be expected to work 70+ hrs a week and unable to leave a job for fear of not getting another.
It seems by the time enough Republicans realize this, it will be too late, and we will all be too poor to be able to fight back. (if we aren’t already there…)

JP

March 31st, 2011
1:48 pm

So a tax increase on 33% of people making $80-$140K per year (option #1)…… What about those making more than $140K per year?

So can we finally say both parties are the party of tax increases?

yuzeyurbrane

March 31st, 2011
1:51 pm

The story around the Capitol for the last few weeks was that it was dead for this session. Then, in what appears to have been a last second gambit, the House Republican leadership seemed to think they could get most of it through with 1 tweak re the tax on groceries. Yet, as analysis developed it turned out that some of their premises are at least arguably wrong. Of course Kyle is right that it should be set aside in favor of an open and transparent review. I do take issue with his continued mischaracterization of the whole effort being a “reform”. The Commission was merely use of 1 of the oldest political tricks in the book to pass controversial legislation which favors special interests. Just delegate it to a stacked Commission and limit the vote on their recommendations. But best laid plans sometime fall awry. Kyle, where is your proof that a lower income tax rate for the wealthy with credits for businesses will actually improve the job picture in Georgia? There is none. Georgia already has 1 of the lowest busn. tax structures in the country and all it has gotten us is a budget in bad imbalance and a 49 ranking in virtually every category that might help us in the long run (e.g. education). Let’s stop corporate socialism.

Same story, different book!

March 31st, 2011
2:09 pm

Bottom line, those that don’t work get back, for those that have plenty, it does not matter, and for me who is that ” middle class”, I and many others get to carriy the burden. If it increases much and mortgage interest deductions are gone I guess most of us will have to sell our houses and rent again. Great for the economy , dont’ ya think????????

Just remember, the middle class makes up a large portion of the circulating economy and the voting public.

retiredds

March 31st, 2011
2:14 pm

Same story, different book: I hope you are not one of those who wished the Republicans would change things under the Gold Dome. The reality is that the middle class always gets s….ed by the politicians (be they R’s or D’s) because they are beholden (purchased) by $$$$ that only come from the upper class and corporate types. So, something will be passes at midnight on the final day and it won’t favor the middle class.

retiredds

March 31st, 2011
2:14 pm

Enter your comments here

Road Scholar

March 31st, 2011
2:47 pm

scrappy; I think you are on to something!

Hillbilly Deluxe

March 31st, 2011
2:55 pm

Actually, we have six brackets…it’s just that the top one, at 6 percent, starts at only $7000 of taxable income. The proposals would all create a flat rate. But that is not what we have now.

If I’m not mistaken, those brackets were set in the 1970’s, when incomes were far less than they are today. They haven’t been indexed to/adjusted for inflation, in all that time. The vast majority of taxpayers are in the top bracket. So they’ve been using that as a back door tax increase for the last 35-40 years.

Grover Gaddis

March 31st, 2011
3:08 pm

Ralston sez he’ll push it through no matter what. We’ll see. We may later see a tax as big as his nose and ears.

Karl Marx

March 31st, 2011
3:34 pm

Quit crying everyone. We have the BEST Republican legislature Lobbyist can BUY! We voted them in NOW we get what we deserve. You going to vote them in again?

Kingfish

March 31st, 2011
3:34 pm

Let’s just slow down and start over!!!!!

findog

March 31st, 2011
3:40 pm

The real problem is Zig-Zag Zell decided if a three strike law sounded tough on crime he’d up it to two strikes and then not fund jails for all the extra criminals because he thought criminals would be smart enough to quit after the first go round; hard to determine the bigger idiot
Then that old sly fellow with the nice place on Lake Burton he got for a dollar from the big utility thought he’d cut taxes on groceries to keep the common folk from voting against him [he is a Democrat at the time] as an abortion on demand party member
What would be nice would be if a politician had a cut in services firmly tied to any tax cut and a revenue enhancement similarly applied to new spending instead of the drunken sailor on shore leave in good times and the televangelists we get during the troughs

old timer

March 31st, 2011
3:53 pm

I guess I will just stay in Tennessee…NO state income tax. My husband and I are both retired and love it here.

carlosgvv

March 31st, 2011
4:05 pm

Tax reform in Georgia written by the Republicans is just a smoke screen for more tax cuts for Big Business and more tax increases on the middle class.

BILL McCARY

March 31st, 2011
4:52 pm

AX THE TAX ALCHOL SALES ON SUNDAY IS A SMOKE SCREEN TO TAKE THE ATTENTION FROM THIS MONSTER OF A TAX INCREASE MY REP.WILL NOT ANSWER MY E-MAIL PROBABLY OUT TO LUNCH WITH LOBBIST.OR PREPARING FOR A JUNKET FROM THE CHAMBER OF COMMERCE

Capital Idea

March 31st, 2011
5:22 pm

Maybe the GOP leadership just wants the Democrats look like the real fiscal conservatives under the Gold Dome.

Maybe it is time for them to go home – and go home for good if they vote for tax increases.

Thomas

March 31st, 2011
5:22 pm

“Transparently.” Key word in your article Mr. Wingfield. You are a brave soul to bring this to the light of sunshine without retribution.

I Report (-: You Whine )-: Thee Magnificent!!! mmm, mmmm, mmmmm! Just sayin...

March 31st, 2011
5:35 pm

Wow, we really showed Khadaffy, didn’t we?

“If this aggression did anything, it only rallied people around the leader and the unity of the nation,” Mussa Ibrahim said in Tripoli. “Especially now. They see a clear enemy.”

The strongest nation in the world, humiliated.

We are a joke.

I Report (-: You Whine )-: Thee Magnificent!!! mmm, mmmm, mmmmm! Just sayin...

March 31st, 2011
6:22 pm

Matt Lauer: Well, let me flip that coin on its other side. If there are flickers, as you say, of Al Qaeda among the rebels, would it not be a sign to them or showing them that the United States has compassion, and we’re willing to use our military might to help all people?

Bachmann: Compassion for Al Qaeda?

Michelle took little lib boy all the way out.

Just sayin…

Sales Taxes are Regressive

March 31st, 2011
6:33 pm

“A few weeks ago, Andy Kroll caught Mississippi Gov. Haley Barbour saying he’d ‘dug out of a $720 million budget hole in two years without raising anybody’s taxes.’ The problem? Barbour had raised a couple of taxes…

…the South relies much more heavily on sales taxes and much less heavily on income taxes than the Northeast does….

Being anti-tax doesn’t mean your state doesn’t need revenue. Instead, what it often means is that the composition of how you get that revenue ends up being more regressive. You tax goods more than incomes, slap higher user fees on the sorts of public services (buses, parks, libraries) that the poor use more than the rich, and generally try to raise money in ways your wealthier, more politically powerful constituents don’t notice.”

http://www.washingtonpost.com/blogs/ezra-klein/post/how-the-south-taxes/2011/03/28/AFrGqz9B_blog.html

Groucho

March 31st, 2011
6:47 pm

I’m glad that the idea to put an extra tax auto repairs and maintenance seems to be dead in the water at this point. This tax seemed squarely aimed at the poor and middle class. Wealthy people generally get new vehicles every few years, you never see them driving older cars with high mileage. That idea was almost as bad as the idea to put an extra tax on groceries.

Dan

March 31st, 2011
9:34 pm

“the only increase would be for about one-third of those earning between $80,000 and $140,000 a year”- so the best case scenario under the GOP numbers is that 1/3 of the middle class wil pony up to fund a tax cut for everyone who earns more than they do – all righty

Glad to see Kyle regards those folks to be acceptable collateral damage if that what is necessary to lock in a tax cut for everyone making > $140K

No matter how you work the numbers this is a big tax cut for the wealthiest Georgians that the middle class is being asked to pay for – if the Republican leadership wants to run a lab experiment on how blatantly they can do the bidding of their wealthy masters without losing elections because of it they should ramrod this tax hike through and see what happens

Evelyn

April 1st, 2011
4:24 am

The majority party declared that they wanted to make Georgia more attractive to executives by lowering the tax rate because Alabama and Florida offerred zero tax rates, and that might sway them. YAY, but then you would have to live there!!! Georgia has natural beauty; so long as Senator Gooch and Speaker Ralston doesn’t screw that up,by putting a regional airport next to Big Canoe and the nation parks up there, we will continue to have a great place for those executives to go.

fulldawg

April 1st, 2011
9:57 am

This is not the time for such chicanery.

hconcerned taxpayer

April 1st, 2011
4:26 pm

So the bottom line is still, as the old saying used to go: If the legislature is in session, hold on to your wallet.

I say it’s time to do some spring cleaning. Unfortunately, we’ll have to wait for an election.

[...] Wingfield at the AJC fears that the attempts to reach a broad consensus among Republicans will water the bill down to make it [...]