No good reason to rush a vote on mediocre tax package

We saw this movie last year: Georgia’s legislative leaders wait until late in the session to try to make changes to the tax code, even as questions remain about elements of the package, their projected impact on the state budget, and the assumptions underlying that projected impact. Only, this year the action is happening later, after less public discussion, with less time to review the projections. The House reportedly will vote on the bill later today, and the Senate before the end of the week.

It was a bad idea last year, and it’s a bad idea this year.

Despite protests to the contrary by legislators, this year’s tax bill — in no way can it be considered a real tax “reform,” much less a “comprehensive” one — does not comprise only changes that have been thoroughly vetted in public. The “E-Fairness” element, a.k.a. the “Amazon tax,” was not part of the mix last year. It’s a tax that, in most of the states in which it’s been passed to date, has succeeding less in “leveling the playing field” between online retailers and brick-and-mortar stores than in triggering lawsuits.

Other elements of the proposal incorporate aspects of earlier plans without explanations for why they evolved the way they did. For instance: Eliminating certain exemptions from the sales tax makes sense as part of an effort to broaden the base and lower rates (on either the sales tax or the income tax). But why eliminate only the exemption for the film industry? And why add a new exemption for building materials used in some — not all — construction projects?

Reducing the “marriage penalty” in the individual income tax is a worthy goal — but more worthy than trying to reduce the income tax rate for everyone? Lowering that rate was the central component of last year’s attempt at tax reform; this year, it’s missing in action. Is reducing the marriage penalty, with a net revenue reduction of $362.6 million during the next three years, really equivalent to changing the way the state taxes automobiles, with a net revenue increase to state and local governments of $365 million during those years? Is that latter number even correct, given that the state is pledging to compensate local governments for their revenue losses? (The state stands to gain revenue from the car-tax change, while locals lose money.)

And if the change in the car tax — replacing sales tax and the annual ad valorem tax (a.k.a. the “birthday tax”) with a one-time title tax — is really such a good deal for taxpayers, why does it result in a net increase in revenue?

There are two elements of the package that ought to be passed this year: The exemption for sales tax on energy used by manufacturers, and the modernization of the exemption for sales tax on certain purchases by the agriculture industry. The former is a tax that surrounding states do not charge, and thus it inhibits economic growth in Georgia. The latter is a virtually revenue-neutral overhaul of a messy portion of the tax code that developed ad hoc over the past several decades (for example, if a farmer heats his chicken house with natural gas, the fuel is tax-exempt; electricity used for the same purpose, however, is not). Any jobs that are created as a result of this tax package will almost certainly owe to one of these two provisions that eliminate taxes on business inputs, which is broadly considered to be smart tax policy.

Our legislators seem eager to boast that they’ve cut taxes but loath to do so in a way that actually affects the state budget (affecting local budgets is another matter). With that attitude in mind, I suggest the following:

Impose only the energy tax exemption and overhaul of agriculture exemptions, which together reduce state and local revenues by less from 2013 to 2015 than the entire package would ($250 million vs. $306 million). Then, return next year with a renewed effort to achieve the goals the Legislature set out in 2010: that is, the goals of flattening, broadening, simplifying and lowering taxes across the board.

– By Kyle Wingfield

72 comments Add your comment

George Walton

March 20th, 2012
1:19 pm

C’mon Kyle…………….the money for your presidential candidate choice’s moon-shoot HAS to come from somewhere. ..Every state should pay their fair share.
.
Newt , or whoever, has to combat global-warming too.
.
Get with the new “collective” GOP ..and their new “2040-10-year” plans.

Don't Tread

March 20th, 2012
1:20 pm

Well sure there’s a good reason to rush the vote…but the reason isn’t “good” for Average Joe, just the special interests.

Rafe Hollister

March 20th, 2012
1:24 pm

Georgia needs major tax and education reforms, but I’m afraid anything this groups of bozo’s comes up with will make things worse. The only vote that will help Georgia is the vote on the last day to Sine Die.

Just saying..

March 20th, 2012
1:34 pm

Perhaps making false use of the phrase “Tax Reform” a capital offense would help…

BW

March 20th, 2012
1:44 pm

The issue as you state is tackling this early in the session rather than later. These people would rather steer superfluous anti-abortion, pro-gun bills through early in the session to prove to their constituents that they are “working” rather than tackling the real issues of transportation, education, water supply, and the Port of Savannah dredging. Just more of the same from this group…but isn’t that what the word conservative means.

Karl Marx

March 20th, 2012
1:55 pm

Republicans, Democrats, in the state house there is really no difference. All are on the “make government bigger and more invasive” bandwagon while creating more taxes on the middle class while giving their lobbyist buddies a big tax break. What we need are true fiscal conservatives but I fear they are extinct. So let’s be honest what we have now are Republicrats and Demicans who want bigger government and more taxes. There is really little difference between the two parties. So unless you want bigger government and higher taxes there was no reason to even bring up this tax plan at all. This session or any other.

ragnar danneskjold

March 20th, 2012
2:41 pm

Well written, persuasive. If it is not worth doing well or right, it is not worth doing at all. A lousy or meaningless change brings only disrepute on the majority ramming it through.

Ernest T. Bass

March 20th, 2012
2:48 pm

Hard to take someone serious who voted for Newt Gingrich.

Kyle Wingfield

March 20th, 2012
3:06 pm

In that case, Ernest, please feel free not to bother yourself with reading and commenting.

Linda

March 20th, 2012
3:32 pm

If Clint Eastwood wrote a commentary, he could not have said it any better.

Michael H. Smith

March 20th, 2012
4:05 pm

I wonder why the leftwing Marxist trash that frequents your blog bothers posting their worthless socialist blather when they know your resident conservatives readers are going to completely reject all of their anti-individual liberty, anti-liberated capitalist market and anything anti-freedom of education choice drivel.

Oopsy, did I say school choice? Ah dang it, guess I did! Oh goshy, did we get a Charter School Amendment to the State Constitution on the ballot whiles these Marxists were snoozing?

Anywho Kyle, I’m not exactly overjoyed with what I’ve heard so for on this latest tax bill. But guess we should’ve waited, huh? I mean, for Stacy Abrams to tell us what we already know about this bill, now that YOU’VE said it all on your blog Kyle so these socialist libs can claim Abrams is the one to rightly inform us on what’s good or bad and we’re not really in the know? :roll:

JF McNamara

March 20th, 2012
4:13 pm

“But why eliminate only the exemption for the film industry? And why add a new exemption for building materials used in some — not all — construction projects?”

Who bought dinner, gave me a golf round, or tickets to this weekend NCAA tournament?

Hillbilly D

March 20th, 2012
4:13 pm

This just sounds like the usual tax increase/shift masquerading as tax reform. I’ve seen this movie several times over the last 40 years or so.

Jefferson

March 20th, 2012
4:36 pm

The best tax reform for GA should be a progressive income tax rate. What you write is pretty true, so why should we expect the politicans (boy it would be nice if they were leaders) to do what is needed.

Kyle Wingfield

March 20th, 2012
4:46 pm

The House passed the bill today 155-9, a margin which obviously bridges the two parties. Minority Leader Stacey Abrams spoke in favor of the bill (specifically, in favor of the portion that attempts to collect more sales taxes from online retailers) as did a number of Republicans. So did Speaker David Ralston, which is mighty rare.

The bill now goes to the Senate, where it could be put to a vote as soon as Thursday.

No Artificial Flavors

March 20th, 2012
4:47 pm

Nice move keeping those dad gum hollywood liberals out of Georgia. Seriously though, in my neck of the woods, movie and tv production has been a huge boost to the local economy by keeping the small mom and pop shops and restaurants thriving. I guess small business does not have clout for the good ol boys though they pay lots of lip service to them on the campaign trail.

Also, this whole tag title transfer is going to create a huge black market. I hate the ad val auto taxes but there are better ways. Good point about the questionable revenue figure kyle. I too think I will make a bajillion dollars next year. Ain’t life grand.

Hillbilly D

March 20th, 2012
4:57 pm

Do y’all remember why we have “the birthday tax”, instead of everybody having to get their tags at the first of the year?

Will

March 20th, 2012
4:58 pm

And you are surprised that this “tax and spend” proposal by big government republicans was overwhelmingly approved by democrats?

Tax, tax and tax. That is what politicians do. It is a bipartisan disease.

Cutty

March 20th, 2012
5:00 pm

The film industry tax exemption was probably the only tax break I thought Sonny and his cronies got right. It brought needed revenue into the state, and provided many opportunities for small businesses. No wonder these guys had to do away with it.

Jefferson

March 20th, 2012
5:01 pm

Expect property tax increases if the state won’t pay teachers. Troopers and other state employees, good luck.

Jefferson

March 20th, 2012
5:03 pm

HillD – auto dealers bought that deal so they wouldn’t have to poney up on jan1.

Hillbilly D

March 20th, 2012
5:08 pm

Right you are, Jefferson. It was sold as a convenience thing, so everybody wouldn’t be in line at the same time but you’re right, the real reason was so auto dealers would no longer have to pay ad valorem tax on vehicles. I was in the business at the time and my dealer principle was big in the NADA. They went to a lot of effort to get that one through. It shifted the tax to somebody else and we all know who that was.

Kyle Wingfield

March 20th, 2012
5:20 pm

Cutty: Just to be clear, only the sales tax exemption is going away for filmmakers. The tax credit remains in place.

what

March 20th, 2012
5:25 pm

When a Republican proposes something ,hide your wallet if you are not part of the 1%.

Laner

March 20th, 2012
5:26 pm

Meanwhile none of these clowns made any serious move to go to a no income tax plan, despite we are losing out to our neighbors to the north and south that offer such tax systems. Why why why why why? As for the minor changes it is starting to appear the Ga repubs are getting as good at crony capitalism as their predecessors and those in Washington. What a shame, can’t we get things simplified?

Linda

March 20th, 2012
5:27 pm

Wish GA pollen producers could be taxed. Hope the DC Democrats aren’t reading this blog to get my ideas.

Karl Marx

March 20th, 2012
5:32 pm

Looks like it’s over. Atlanta news is reporting the house passed it. It sound just like when Washington passed Obama care, without reading it. Way to go Bozo’s

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

March 20th, 2012
5:33 pm

Monday I spoke to a smart political mind who had been watching focus groups of wavering Obama voters in swing states, and he said that one word that those voters kept coming back to, again and again, was “naïve.” (The term was to describe the president, not themselves.) Those who voted for Obama won’t call him stupid, and certainly don’t accept that he’s evil. But they have seen grandiose promises on the stimulus fail to materialize, touted as the answer to all their health care needs and turn out to be nothing of the sort, pledges of amazing imminent advances in alternative energy, and so on.

Yeah but you can fool a dummycrat twice.

sheepdawg

March 20th, 2012
5:37 pm

kyle, you made perfect sense!! good article on the corrupt georgia legislature. keep pounding the puppets!!!

Real Athens

March 20th, 2012
5:43 pm

“Hope the DC Democrats aren’t reading this blog to get my ideas.”

Absolutely nothing to worry about there. Folks only laugh at them.

Just saying..

March 20th, 2012
5:45 pm

“The House passed the bill today 155-9, a margin which obviously bridges the two parties.”
Which means:
-It is clearly a Great Bill
or
-There are some Great lobbyists at the Capitol

Eric

March 20th, 2012
5:59 pm

Why should married couples suddenly reap the benefit of increased tax exemptions? What about helping single adults who have only one income to pay the same rent, transportation, food, and utilities costs?

Kyle Wingfield

March 20th, 2012
6:16 pm

Eric: It’s not an “increased tax exemption.” It’s a decreased discrepancy…the current structure already favors singles.

Besides, do you really think single people have the same transportation and food costs as two married people?

Linda

March 20th, 2012
6:51 pm

Georgia Legislators, don’t think for a moment that only those who comment on Kyle’s blog are the only people who read Kyle’s blog, which is followed by people, not just in GA, but folks all over the nation & world. You have ways to verify my statement. Kyle has been keeping abreast of the action & lack of action by the GA legislature & keeping his readers informed by being there in person. We know who you are & what you did last night & yesterday & the day before. We know who is corrupt (the majority) & who is not (only a few). We are awake, thanks to Kyle, & will be following you & your motives. We don’t care which party you claim to be associated with. We will hold you accountable. You are an embarrassment to our state & our nation. We expect better of you. Shape up or we will ship you out. Don’t forget the ‘10 elections. The ‘12 elections will be about kicking the establishment out. Mark my words.

The Centrist

March 20th, 2012
7:29 pm

There is a reason to rush the vote. Forget the conservative versus Southern Democrat crap, just like Nancy Reagan used to say, “Just say NO!.”

Ray

March 20th, 2012
8:15 pm

I thought I understood the Republican party doesn’t want the government picking winners and losers. Does that just apply on a federal government? Lobbyist clearly have undue influence over local sales tax exemptions (remember Gulfstream’s effort last year to have sales tax exemption for private jet plane parts?)

We are NEVER going to get tax reform. This leg. is a joke of an effort.

Atlanta Mom

March 20th, 2012
8:18 pm

I was shocked to hear there was a tax bill on the table. Not a single word about it for the first how many days the legislature has been in session? This is not an overhaul of the current code, it’s not even a thoughtful change. It’s change for the sake of change.
BUT and HOWEVER, if they are going to change anything, it should be the income tax exemption for “unearned” income for those over 65. That gift from Sonny was an absolute travesty. And everyone here needs to understand that law. If you are over 65 and you have to go to a job and get a paycheck, then you get to pay income taxes. But, if you worked for a company that had a pension plan, and they are paying you, then you don’t have to pay income tax. A sweet deal for some segments of society

catlady

March 20th, 2012
8:54 pm

‘Fraid they didn’t listen to you, Kyle. Of course, they don’t listen to anyone without the “green”, and I am not talking about the Irish.

No Artificial Flavors

March 20th, 2012
8:55 pm

You are correct Ray, read the Ga code sections on tax exemptions. It will blow your mind. Pecan harvesting equipment for example has been there since, I think, the 70’s. But no, we can’t let gubment pick the winners and losers.

bluecoat

March 20th, 2012
8:57 pm

Pelosi style,push the bill through then find out what it’s about.Favorite of Gov.Deal,and supported by speaker Ralston.

Lil' Barry Bailout (Revised Downward)

March 20th, 2012
10:08 pm

According to one news report:

Governor Nathan Deal and top House and Senate leaders from both parties gathered at the state capitol for a working discussion over the shape and size of tax reform. The meeting was designed to promote bipartisanship.

But Governor Deal showed that in an ideological debate, he’s not averse to using a jab.

Challenged by one Democrat senator over the contents of the package, the governor, according to participants, replied: “I won.”
——————–

Except, oopsies, it wasn’t our Governor Deal, it was your Klown Prince Obozo.

http://tinyurl.com/b8fgbr

Old Timer

March 20th, 2012
10:50 pm

Internet sales tax? A dead issue, as many states have found. The car title tax? More centralization of revenue collection, leaving the counties at the mercy of the state. The only part that makes sense is the limitation on the exemption of retirement income from taxation. It never made any sense to tax a working guy 6% of his taxable income, while seniors with millions in retirement income didn’t pay a cent of income tax.

MountainMan

March 20th, 2012
10:56 pm

Looks like all the retirees will be moving to other states after they gutted the retirement income exclusion in this bill.

[...] In passing the bill, they dismissed pleas by Tea Party activists, some conservativesand an AJC columnist to slow down the public process for final passage. The Speaker of the House took the well to [...]

Bradley

March 21st, 2012
8:42 am

Maybe the democrat approach which is “take more money” would be better. Obama and the lefties are busy casting about for a way to fund their vision of a state dominated, moocher supported America which lies to the public about “fairness” and “equality”.

Lil' Barry Bailout (Revised Downward)

March 21st, 2012
8:54 am

“moocher supported”
——

There’s two words that don’t belong together, unless one is speaking of liquor stores or the lottery.

Oblama

March 21st, 2012
9:03 am

King Roy screwed up the state government so bad when he was in office that we will never want his like in Georgia again. What we have now is better than King Roy. We have a balanced budget …. something the Dems and King Obama don’t have.

Oblama

March 21st, 2012
9:29 am

“Progressive” is just a code word for “liberal” control over your private lives …. big government programs from the cradle to the grave because you are stupid to manage your own life and government knows best. From day care raising your child to Oblama Care to have someone else manage your health care. The government thinks you are to stupid and they know what’s best. It’s all a scheme to do every thing for you so you will keep them in office. Vote NO to the big government takeover of your life. TERM LIMITS in Congress.

Jefferson

March 21st, 2012
9:48 am

The intenet tax is so dumb because they can’t enforce it without hiring hundreds of auditors. Sales tax fruad within the state is already out of control. So how are they going to control the whole nation? It may get added on to purchases, but a lot will never make it back to GA, just like with the instate. The retailers just keep the money. You can bet the estimates won’t pan out.

R. Stroz

March 21st, 2012
9:48 am

The “One Time Title Tax” is being “pitched” as a better alternative to a yearly ad valorum tax. I tried to explain to several politicians that the yearly ad valorum tax wasn’t the problem as much as the “passing the emissions test hassle,’” when, if your car didn’t pass, you had to spend a pantload for repairs.