State lawmakers wait for Tax Reform 2.0 to be put in writing

Don’t expect Tax Reform 2.0 legislation to pass out of its joint House-Senate committee this afternoon. At best, we’ll have some of the details in writing.

Here’s the strategic problem now facing the measure:

Because of the way the process was structured last year, once the bill is passed out of the joint committee, the legislature is engrossed and can’t be changed by either chamber. Which means that vote counts on both sides have to be solid before the legislation begins to move.

But we’re discovering some extreme reluctance – especially among Senate Republicans – to commit to anything that hasn’t been set down on paper. We couldn’t find a single GOP senator willing to line up behind the measure, which promises a 25 percent reduction in the personal income tax rate in exchange for sales taxes on satellite TV, casual car sales and – for the first time – a sales tax on the labor in auto repairs.

“How do you whip a vote on something that’s not in writing?” one longtime Senate observer said. And remember that the Senate stripped Lt. Gov. Casey Cagle of his power over the chamber in part because of his arm-twisting on the hospital bed tax last year.

This year, any arm-twisting will have to come from within the caucus.

One Republican senator we spoke with said the claim of “revenue neutral” won’t be enough – he would have to know which Georgians will be paying more taxes, and who won’t. One concern is over what deductions are removed, and which ones stay in.

Another said senator said he was not about to be compared to the Democratic Congress that passed health care reform without reading the bill.

The only one who would be quoted on the record was former Senate president pro tem Eric Johnson, who was checking in with old colleagues on Monday – sporting a lobbyist’s badge.

About the tax overhaul? “The devil’s in the details,” Johnson said. “But Republicans have been advocating a consumer tax for years. If they’re moving in that direction, they’re moving in the right direction.”

Georgia Public Policy Foundation has a quick analysis by Kelly McCutchen that makes one think that they’ve seen the details — which include a $17,000 limit on income deductions. That’s for mortage interest and charitable gifts.

Two paragraphs from the analysis:

There is a concern that limiting itemized deductions might limit charitable deductions. We believe this is unlikely. First, we believe that most people donate because they support the charity, not to receive the tax deduction. Second, if they are motivated by the tax deduction, the impact of the state income tax deduction is minimal compared to the federal tax deduction. Third, the top marginal rate was reduced by 22 percentage points during the Reagan tax reforms, but charitable donations increased despite this large disincentive. What drives charitable giving is economic growth – and that is the goal of this tax reform.

Without access to actual Georgia tax return data it is very difficult to get precise estimates, but we are able to make some general projections based on aggregate data. Under this new plan, our projections show everyone who takes the standard deduction on their federal form will be better off. For itemizers, it depends on the amount of itemized deductions and their income level. Our best estimate is 85 percent of Georgians will pay about the same or less under this proposal than under the current income tax code.

The communications lobby has thrown itself into high gear. Over the weekend, cable TV and telecommunications companies – which are already taxed on the service they provide – released a poll that indicated strong GOP primary support for a shift to consumer taxes. And for a move, for the first time, to include satellite TV under that umbrella.

Dish Network and Direct TV, meanwhile, say they have directed 30,000 e-mails to state lawmakers protesting the new tax.

Rural legislators may hold the key. Within the satellite TV industry, 42 percent of the customer base is considered rural. One would also assume that casual auto sales are more important outside big cities as well.

If action on the tax overhaul is to be completed by Friday, when the Legislature dives into a break more than a week long, the House-Senate committee would have to pass the measure out by Tuesday, or possibly Wednesday. That would allow the House to vote on the matter Wednesday.

Should it pass the House, the Senate would require three readings before it could consider a final vote on Friday.

- By Jim Galloway, Political Insider

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32 comments Add your comment

Last Man Standing

March 28th, 2011
3:24 pm

I wonder if any of these elected officials have thought much about the tax to be added to the labor cost for repairing automobiles? A high number of these businesses have failed in the past two years because people either do not have the money for needed repairs or aren’t going to part with the money. This certainly won’t help an already bad situation. Taxing Dish and Direct TV usage will affect an awful lot of rural people. Is there a tax on cable TV? If there isn’t, look for some flack from that issue!

DannyX

March 28th, 2011
3:34 pm

Looks like LMS likes certain entitlements. What’s up with rural Georgia? I’m pretty sure its where all the rino’s come from. They gobble up metro Atlanta tax dollars, 20% of rural jobs are government vs 10% in the city, they hire illegals like crazy, they love all their special entitlements. These socialist programs do nothing but redistribute the wealth.

I think rural Georgia is ready for some tough love.

GaBlue

March 28th, 2011
3:45 pm

I haven’t crunched the numbers yet, but I’ve got a sick feeling that the money I save on state income tax will be considerably less than all the hundreds of additional nickel & dime taxes they’re slapping on everything else.

jd

March 28th, 2011
3:54 pm

GPPF charts are interesting — clearly the top 15 % will see a cut – no one else will. But, those working families making less than $60k will see more of their income taken for taxes on car repairs, hair cuts, other necessities…

And, lets not forget the tax credits to wired telecom, delta, synovus, etc…

Centrist

March 28th, 2011
4:00 pm

Suggest sending this (in your own words instead of copying and pasting):

The current legislative session appears to be reneging on the phase-out of taxing pensions, and keeping only the current $35K exemption. Not only is this a break of faith for those of us who decided to retire in Georgia instead of a neighboring state that exempts such taxes, it will turn out to be a revenue loss as economic retirement decisions are made.

Losing pensioners to other states results in the loss of their typically larger discretionary spending which create jobs and sales tax revenue. Such pensioners are generally more law abiding than other population segments, and they pay property taxes. They also don’t normally use state services and infrastructure nearly as much as commuting working families with children.

Republican representatives generally make tax decisions based on dynamic studies instead of the typical static studies Democrats make ignoring reactive backlash behavior. What happened this year?

You can find your local Georgia state representatives and their email addresses by typing in your zip code + 4 in the top box here: http://www.votesmart.org/official_state.php?state_id=GA&dist=&go2.x=5&go2.y=8

td

March 28th, 2011
4:09 pm

jd

March 28th, 2011
3:54 pm
GPPF charts are interesting — clearly the top 15 % will see a cut

How do you figure that? If the mortgage interest and charitable deductions are capped then the rich will not receive as many deductions. Sounds like to me the seniors, that have paid off their houses, will get the biggest tax break.

[...] a deal with Phoenix Satellite TV where the latter will distribute a new free- more… State lawmakers wait to see Tax Reform 2.0 in writing – Atlanta Journal Constitution (blog) – blogs.ajc.com 03/28/2011 State lawmakers wait to see Tax Reform 2.0 in writingAtlanta [...]

Centrist

March 28th, 2011
4:26 pm

@ td wrote: “Sounds like to me the seniors, that have paid off their houses, will get the biggest tax break.”

Convoluted logic to say folks who no longer have a deduction get the biggest tax break.

td

March 28th, 2011
4:28 pm

Centrist

March 28th, 2011
4:26 pm
@ td wrote: “Sounds like to me the seniors, that have paid off their houses, will get the biggest tax break.”

Convoluted logic to say folks who no longer have a deduction get the biggest tax break.

Maybe but this sounds like the ones that will benefit the most.

Last Man Standing

March 28th, 2011
4:39 pm

DannyX:

“Looks like LMS likes certain entitlements. What’s up with rural Georgia?”

Wrong – again.

When I wrote re the taxation on labor for auto repair shops, I was thinking of the Atlanta area as they have been the hardest hit. They already have to charge their customers sales tax on replacement parts and taxing labor might be the straw that broke the camel’s back for many of these facilties that are just “hanging on – barely”.

My point re Dish and Direct TV was simply that if those taxes are imposed, similar taxes should be applied to cable users.

DannyX

March 28th, 2011
4:49 pm

“My point re Dish and Direct TV was simply that if those taxes are imposed, similar taxes should be applied to cable users.”

I clearly realized you didn’t understand the issue. If you had you would have known that the tax on satellite services would put them in line with cable.

Now on the issue of rural entitlements when are we going to see some Republican action? We need some “where the money goes reform.” Why are the Republicans still redistributing the wealth?

Atlmom

March 28th, 2011
4:53 pm

Wow my proprty taxes are 10k already. Wow so I won’t even be able to take all my deductions? This screams of screwing those in the city-again. Trust me I am nowhere near the top tax bracket. Husband and I already were thinking of leaving, here is yet another reason to.

DW (the real one)

March 28th, 2011
5:10 pm

@Total D0uche

Where ya been at man??

blue dog

March 28th, 2011
5:18 pm

Danny X

Take a day trip through our poorest rural counties, then tell me they have benefited from a redistribution of wealth. The “government” jobs are mostly at prisons, which are out there, because most people like you, don’t want them in their neighborhood…but I guess those underpaid guards are also just parasites to you.

td

March 28th, 2011
5:19 pm

DW (the real one)

March 28th, 2011
5:10 pm

I took the time to write to you earlier but I guess you do not know how to go back and check your previous post on a different blog:-)

DW (the real one)

March 28th, 2011
5:24 pm

@D0UCHE

OMFG I am ROTFLMAO!! Everyones gotta see this post in all its glory… here goes:

March 28th, 2011
11:40 am
@td AKA: TOTAL D0UCHE!

Where ya been buddy?? Hows that fighting sunday sales thing going for ya?

Looks like you have won the battle. You know will be able to buy 7 days a week. The irresponsible drinkers will now be able to buy that extra 12 pack on Sunday. They will be able to sit, drink more and cheer for there favorite football team and watch their kids play with their toys in the background. The extra consumption will only lower there inhibitions more and when their favorite team looses the game in the last minute they will go take out the anger on their children for making to much noise during the game.

I hope you are happy because I want you to remember this every time you hear of a child or wife death on Sunday for the rest of your life and take the appropriate blame for helping cause the situation. My conscience will be clear because I have done everything in my limited realm of influence to stop this escalation of abuse that WILL happen now but I guess you will just crack open another beer to help you forget.

Good luck my friend.

DW (the real one)

March 28th, 2011
5:32 pm

Thats GOTTA be the most incoherent rambling ive ever read in my life! I am now dumber for having read it. Thanks again for the laugh d0uche

Last Man Standing

March 28th, 2011
5:32 pm

DannyX:

“Why are the Republicans still redistributing the wealth?”

“They gobble up metro Atlanta tax dollars, 20% of rural jobs are government vs 10% in the city, they hire illegals like crazy, they love all their special entitlements. These socialist programs do nothing but redistribute the wealth.”

“blue dog” has it right. Most folks in rural Georgia would give you your prisons back. It would only seem fair since so many of your urban folks are filling them up. But you, and so many others in the urban areas, don’t want these prisons there. You shuffle them off to us. There are other government jobs that span the state, such as the State Patrol, the GBI, Forestry Service, DNR and DFACS, but those don’t amount to that many jobs in the grand scheme of things. I just want you to realize that the rural Georgians pay taxes just as you do. I’m sure you didn’t mean that the City of Atlanta is supporting rural Georgia? If you did, that will be my laugh for the day!

blue dog

March 28th, 2011
5:35 pm

Taxing casual sales did not work before when Zell tried it…why will it work now. I can fill out a bill of sale for $ 1.00 and you can’t prove it isn’t a “gift”. Now we can hire a bunch of inspectors to audit all these sales and have “appeal” boards for problem sales…or we could use the states Revenue Dept, as is, and add 1% to the states current 4% tax rate without a problem. The counties get those added 1% education, local option, special purpose, MARTA, etc. Change the law to stop any one of those “county taxes” from being allowed, and the taxpayer has virtually “no increase” in their taxes…or we could just go back to taxing groceries. It that just too simple for the guys.

double

March 28th, 2011
5:51 pm

Hogs eating acorns never looking up to see where they come from typical Democrats.

DannyX

March 28th, 2011
5:54 pm

I’m all for a little wealth redistribution.

LMS on the other hand has been complaining about it for ages. He suddenly changes his tune when it benefits his own. Just last week LMS acknowledged he could care less about Clayton County children. Why should metro taxpayers care about rural kids? (Maybe because its the right thing to do.)

Of course the many rural entitlements are off limits. That’s why you don’t hear a peep from the Tea Party types when it comes to state government. Rural Tea Party types love Atlanta entitlement money. Rural Democrats quickly switched parties then kept their entitlements.

“Keep your hands off my metro-Atlanta tax dollar entitlement” is at one end of the Republican spectrum with here with “We want OUT of Fulton County” at the other end.

Its time for tax redistribution reform.

No dog in this hunt

March 28th, 2011
5:56 pm

Sounds like rural GA doesn’t understand that many metro school systems receive less per student in state funds so the state can send that money to rural school systems. Even then, those rural systems claim it isn’t enough and wanted to sue the state. This effective transfer of property taxes from metro to rural more than offsets the prisons. It is not uncommon to see a rural system be 80% state funded and the largest employer in the county.

Just try to consolidate rural systems and cut down on the number of counties (rural jobs) and you’ll see rural GA go crazy.

Metro Atlanta pays for itself and then some.

khc

March 28th, 2011
6:26 pm

mccuthcen’s analysis is not very good…no mortgage deduction unless you are a low income earner

Tony

March 28th, 2011
7:00 pm

Excuse me, but the Republicans have been busy redistributing the wealth for years: out of my pocket through taxes into the hands of private enterprise through tax breaks and bailouts.

Last Man Standing

March 28th, 2011
7:13 pm

DannyX:

“Its time for tax redistribution reform.”

Finally, we agree.

For the record, I have never had a child in public school in a rural area. I have never had a government-guarateed mortgage. I have never had any sort of benefit of a government program except Social Security, which I paid into for 45 years and can’t, in any way, be considered an “entitlement program”. The amount of federal and state taxes that my wife and I paid through all those years (and which I continue to pay) is almost unbelievable.

So you see, DannyX, that I don’t “like certain entitlements”.

td

March 28th, 2011
7:32 pm

DW (the real one)

March 28th, 2011
5:32 pm
Thats GOTTA be the most incoherent rambling ive ever read in my life! I am now dumber for having read it. Thanks again for the laugh d0uche

It is only incoherent to you because you want it to be so that you will not feel any way responsible for the ramification of your decisions today.

td

March 28th, 2011
7:37 pm

Tony

March 28th, 2011
7:00 pm
Excuse me, but the Republicans have been busy redistributing the wealth for years: out of my pocket through taxes into the hands of private enterprise through tax breaks and bailouts

Bailouts are wrong and I agree with you that both political parties are responsible and this practice should not happen. Tax breaks are a fallacy Democrats have made up think Republicans are in bed with big business. Businesses do not pay taxes. They are just embedded into the price you pay for a good or service and you pay them. Government does not really want you to know what it cost to really run the monster and as long as you do not think you are paying it then they are getting away with the scheme.

beowulf

March 28th, 2011
10:09 pm

“Businesses do not pay taxes. They are just embedded into the price you pay for a good or service and you pay them.”
Errr, you’re forgetting wage income and capital income. Taxes can be paid by customers, workers or owners. A firm with a high Lerner index will simply mark up prices, while a firm in a competitive market will take it out of wage or capital shares. The state of the job market (and of course, minimum wage laws) will determine that split.
“The Lerner Index measures potential monopoly power as the negative inverse of demand elasticity.”
http://en.wikipedia.org/wiki/Abba_P._Lerner

td

March 28th, 2011
10:18 pm

beowulf

March 28th, 2011
10:09 pm

Thank you. You just made my point more eloquently than I can. When taxes are to high and minimum wage laws can not pay for the taxes then they corporation will ship the jobs overseas. Bottom line high corporate tax rates reduce job growth.

khc

March 29th, 2011
9:43 am

but our esteemed supreme court says corporations are people so they can pay tax too

beowulf

March 29th, 2011
6:02 pm

td, I agree with you actually that corporate taxes are pointless. Like REITs are taxed (or rather not taxed), pass through earnings and tax burden to shareholder. Our $7.25 Minimum wage has actually dropped in real terms from its 1968 peak ($1.60/hr worth about $10/hr now). Australia has a similar per capita GDP to ours (and currently, Aus $ trades at par with US $). Their minimum wage is $15/hr (5.0% unemployment rate), enough for any full time worker to live on without govt transfer payments. Our politicians prefer that taxpayers subsidize employers with welfare programs for working poor (food stamps, Sect. 8, EITC). Its as dumb an idea now as it was 200 years ago
“The Poor Law Commissioners’ Report of 1834 called the Speenhamland System a “universal system of pauperism”. The system allowed employers (often farmers) to pay below subsistence wages, because the parish would make up the difference and keep their workers alive. So the workers’ low income was unchanged and the poor rate contributors subsidised the farmers.”
http://en.wikipedia.org/wiki/Speenhamland_system