Georgia Fair Tax

The idea of having a Fair Tax style tax system in Georgia is gaining momentum. Back in April, Jason blogged an editorial by Sen. John Douglas expressing support for the idea. Today Rep. Steve Davis wrote on his blog that he has submitted a Georgia Fair Tax bill for the 2007 session.

36 comments

  1. Overincorporated Fulton says:

    The FairTax is a terrible idea…and even more so for the state than for the federal government. Our neighbor to the north, Tennessee, has no income tax, but also features a yearly budget crisis and chronically funded public education to boast as its successes.

    Forcing the entire state government to depend on sales tax revenues that ebb and flow in tight mimicry of the overall economy will subject the state to a yo-yo diet of surpluses and cuts that creates a highly unpredictable environment for critical state government functions, especially education.

    My objection goes far beyond the regressivity of a pure state sales tax (which it is…just ask poor Tennesseans who pay 3.5 times the share of wealthy Tennesseeans as a percentage of their income). Even if you think it’s fair, it’s poor public policy. For a school system that ranks #50 in the nation, I think the last thing that we want to inject is a lack of stability.

  2. Jeff Emanuel says:

    OIFulton, interesting points. We won’t see eye to eye on taxation because we are coming from completely opposite directions — you see fairness in a progressive income tax, while I see that as government penalizing individual success, and see fairness in taxation as needing to be in place across the income spectrum.

    I’m a former resident of Tennessee, and can tell you that the budget crises there, such as they are, stem (as they do almost everywhere) from government handout programs, not from too little being paid in taxes. You and I also won’t see eye to eye on “critical state government functions”; I am a proponent of privatization of almost anything that government does not do as well or as efficiently as the private sector — such as education.

    With the federal and state income tax rates as disparate as they are, I don’t see a state-level Fair Tax being effective without a federal-level companion program. However, I am not so quick to dismiss the idea of a Fair Tax, as I wuold much rather see similar to equal tax rates across the board.

    You are correct in the abstract that a less wealthy person paying the same amount of sales tax on the same amount of goods as a more wealthy person is dedicating a higher percentage of their income to taxes. However, that is the case now with all purchases — neither sales tax nor the price of goods are graduated based on income. The difference between your belief and mine — and correct me if I am wrong; I’m not trying to put words in your mouth — is that you think that somewhere along the line, be it on income, sales tax, price of goods, etc., wealthier people should have to pay a higher percentage of their income in taxes to the government. I disagree.

    However, I DO see a sales tax as targeting the wealthy moreso than the non-wealthy by virue of the fact that more resources = more purchase. People with greater means will purchase more, leading to their paying more sales tax. You are correct, though, that purchasing, both in volume and in dollar amount, will fluctuate due to the state of the economy at every level; however, so will wages, which is the basic determinant of tax rate now.

    Regardless of time spent in discussion, you and I won’t see eye to eye on education and other things needing to be under the thumb of government; nor will we agree on the fairness of a progressive vs. equal system of taxation. However, I think that you did make some good points, and invite you to rebut mine where you may think that I am in error.

  3. CobbGOPer says:

    The only way to make headway at the federal level is if we put the pressure on at the state level. The more states that do away with CONFISCATORY tax systems such as the progressive income tax and move toward a VOLUNTARY

  4. CobbGOPer says:

    Sorry, got cut off. The more states that move to a VOLUNTARY tax system such as a Fair Tax-style retail sales tax, the better argument we have to take to Congress to get the Fair Tax passed at a national level.

    Besides, regardless of fluctuations, the fact is that under such a system, citizens who work hard to earn their money will get to keep MORE of it, and decide for themselves what they want to do with it. Prices in Georgia would probably adjust slightly lower to account for such a system.

    And by the way, not like I want to hold up Florida since they have problems of their own, but one of the reasons for their extensive growth has been the fact that they also don’t have a state income tax…

    Georgia has one of the most dynamic economies in the country, and over the last few years has consistently rated as one of the best places to do business. We do so much to lure these companies and their business, but we do nothing to lower the cost of being a citizen here. And don’t get me wrong, our state taxes are some of the lowest in the country, but they still add up the more money you make.

    It’s about freedom. Don’t take my money when I’ll gladly return it via purchases that I choose to make.

  5. kspencer says:

    ooookay. I read Rep Davis proposal, and I want to highlight a couple of things from it.

    1 – 8 percent sales tax for the state.
    2 – county and locals can push the sales tax to 16% – 17% in some cases. One of the BIG additions they’re allowed to put in without too many restrictions is a 6 (some cases 7) percent tax for trade centers/convention centers/coliseums.
    3 – If a purchase is made of ANYTHING from out of state, the sales tax still must be paid. A credit is given for sales taxes paid to the other state.

    So the residents of Catoosa County are going to pay 11 percent sales tax. If they go to Chattanooga (where the sales tax is ‘only’ 9 percent) they STILL have to redeem 2 percent. Oh, and all those people from Tennessee who slip across the border to buy in Catoosa county (a source of much income)? No more – 2 percent savings is 2 percent savings.

    And there are a couple of “Huh?” elements. For example, a tourist who rents a vehicle in Chattanooga and drives it through Georgia is supposed to pay sales tax on the rental. snicker.

    Buying a house? Sales tax will be applied if it’s a new house. Unless, that is, the contract was made prior to 1 Jan 2008 (date sales tax takes effect).

    If I’m reading it correctly, any internet or catalog purchases you make are to be subject to the sales tax as well.

    Oh – and now every service is to be subject to sales tax as well. Doctor visits, accountants – all of it. Yep, that includes coursework – professional training and private school tuitions and tutoring fees all get to have sales tax added. Oh, and on that bit about buying a house? Taxes get applied to the broker and title investigation and housing inspection and…

    Rentals of houses and apartments jump 8% as well. More if the local government decides to take a share.

    One thing I didn’t see but have noticed in most other fairtax plans is the “used item” exemption. If it’s not there, then that sales tax gets applied to sales of used goods as well as new. That bit about the house sale above? Add the sales tax to trying to sell your current house to the load. And don’t forget to pay the sales tax on the trade-in value of your old vehicle when buying a new one. If, of course, the ‘used property exemption’ is missing.

    So, the baseline calculation is that we get ~3-5% raise to pay for a 5-7% inflation of prices. Can’t say I like that.

    Kirk

  6. RiverRat says:

    There are republicans that I respect, and count as very intelligent and capable people. The Senate President Pro Tem is certainly one of these, and while I disagree with him on many policy issues, I have been very impressed with his political acumen. The current Senate Majority Leader, Sen. Williams, is another GOPer that I have a begrudging respect for. I would count these two as forward-thinking individuals who I can give the benefit of the doubt to and assume they are at least mostly interested in doing what is right for Georgia.

    Sen. Douglas and Rep. Davis, on the other hand, have to be two the most backward-thinking, politically deaf, and obstinante politicians I have run across. They can almost always be counted on taking a short-term, politically harmful position for their party. While the rest of the metro area cries out for commuter rail, Douglas and Davis do everything they can to stymie it – and in politically underhanded ways (the anonymous hold on DOT allocations, for example). I hope these two take larger roles in the state GOP, because they help the Democrats as much as extremist whackos like Nancy Schaeffer.

    I doubt that raising the state sales tax will play that well to mainstream Georgians. I personally haven’t seen polling on it, but I’m certainly not taking the GOP primary results in three counties as a viable judge of public will. My gut instinct however, is that it may fall along the same lines as Social Security privatization did – an electoral loser. Didn’t Sonny nix a similar scheme from the GOP agenda last year because he knew it’d be a mistake in an election year?

  7. Jeff, you and I will have to disagree on how the sales tax targets the wealthy.

    If you mean total numeric amount of taxes paid, then yes, the wealthy by definition will pay more. If you buy a boat (and pay 8% tax) on it and I don’t, well then obviously you will pay more in taxes.

    However, right now the wealthy are taxed a full 6% on their income. Someone who makes $20,000 pays about 4%. Remember, this is their full income. For purposes of comparison lets say the “wealthy” in this example make $200,000 a year.

    Let’s also stipulate that the wealthy person saves $50,000 a year, spends another $50,000 on things that are not sales taxed (like mortgage payments) and spends the remaining $100,000 on things that are subject to sales taxes.

    Now let’s take the average Joe who makes $20,000. He probably spends close to $8,000 on rent and food (not currently taxed) and the remaining $12,000 at the register, which is taxed.

    So, wealthy guy pays:
    $200,000 x .06 = $12,000 in income taxes.
    Average Joe pays:
    $20,000 x .04 = $800 in income taxes.

    Wealthy guy pays:
    $100,000 x .04 = $4,000 in state sales taxes
    Average Joe pays:
    $12,000 * .04 = $480 in state sales taxes.

    In total, wealthy guy pays $16,000 in state sales and income taxes, or about 8% of his total income. Average Joe pays $1,280 or about 6.4% of his total income.

    Now, you propose eliminating the income tax and replacing it with a higher state sales tax. Under this scheme, Average Joe will see his income taxes reduced by $800 but see his sales taxes at the very least double. He will now pay $960 or 4.8% of his income in total taxes. But the wealthy Georgian will see his income taxes completely disappear while his sales taxes, which are much smaller than his income taxes, will double. He will now pay $8,000 a year or 4.0%.

    First of all, I don’t see anyone proposing massive cuts to spending in Georgia, so the 8% tax rate that Steve Davis has proposed is probably too small. In reality the rate is probably much higher, and if counties raise their rates (as KSpencer has pointed out) soon average Joe will be paying much more than he currently pays while the wealthy Georgian will still pay less than he already does. That’s not surprising considering the first piece of legislation he proposed was about College Football Bowl Championship rules. I think Rep. Davis can probably throw a football farther than me, but when it comes to budgeting I would leave it to the experts.

    So while I understand Jeff’s desire for equitable distribution, I think even he’d have to agree with me that when you take a look at the full picture, it isn’t very equal or fair for the average Georgian to pay a higher percentage of their income in taxes than a wealthy Georgian. If you really want fairness, how about having a flat income tax rate and replacing the sales taxes.

    A “flat” sales tax will always benefit the well off — they don’t have to spend all of their money just to get by every month, so the average Joe gets taxed on his entire income while the wealthy Georgian can afford to be selective about what gets taxed and where. Take a used car for example. A wealthy Georgian can have his company’s subsidiary in a different state purchase a new Lexus, wait three months and then buy it used — and avoid paying any taxes. Meanwhile if Average Joe’s car breaks down, and he needs a new one right away to get to his job, it’s off to CarMax and a 8%+ sales tax added.

    To conclude, I find myself in an odd position. I am against this terrible idea and all related legislation. But I know it would be such a raw deal for Georgians (and Americans as a whole) that if Republicans like Davis want to introduce it and pass it, it will probalby lead to massive legislative losses for the Republicans once the plan sinks in, particularly with middle class white voters who up to this point have been voting for Republicans for values reasons. So go ahead, or don’t. Either way it will eventually be a win win for Democrats and the people of this state.

  8. bird says:

    Good discussion–I am thoroughly enjoying this.

    I would take issue with Jeff’s assertion that the private sector better handles education than the public sector. The most comprehensive study on this issue, authorized by the Republican-controlled Congress and administered by the Bush-controlled Department of Education found that when factors like race, gender, disability and school size were accounted for, public schools generally outperformed private schools. Here is the report in its entirety:

    http://www.nytimes.com/packages/pdf/national/20060715report.pdf

    Now, certainly the private sector does some things better, but there is a role for the public sector also. Jeff, you seem very concerned with the best outcome rather than pushing an agenda, but many conservatives blindly see private enterprise as a panacea. I don’t think that is the case. Though small businesses might be some of the most effective organizations anywhere, large corporations often have a substantial amount of waste and inherent inefficiencies. For example, my wife is a former employee of Southern Company, and the poor personnel that were tolerated there would give anyone pause. And, I truly think Southern Company is a pretty well-run enterprise. Now she works probably 70 hours a week for a small company, is one of their top people and loves it. Granted, this is anecdotal, but if there was a segment of society pushing all the stories of private sector inefficiencies, like Boortz and his ‘Gov’t Waste of the Day,’ or whatever it is, there would be a lot more doubters of the private sector. I think the issue is the size of an organization, more so than public vs. private nature in determining inefficiencies.

    Now, private sector businesses are more accountable because stockholders can get rid of incompetent management at any time. Voters generally have to wait four years. But, if the government of Georgia is not doing a good job, then Perdue should certainly go, and we should get a more business-minded CEO.

    So, conceding a somewhat greater inherent inefficiency in the public sector, there is still a role. The public sector is charged with acting in the public’s interest, the private sector is charged with making money. If I want the most tasty soft drink, then certainly the private sector is the best. However, if we’re talking about paying soldiers that represent out country, then we need the public sector. The private sector has an interest in cutting corners if it can. That is unacceptable in certain circumstances. For example, private jails have come under severe scrutiny. There are stories of private jails cutting calories to the inmates to save money, severely cutting access to health care, cutting guards, etc. Now, I certainly am not in favor of making inmates comfortable, but if we as a society are choosing to incarcerate these individuals for their crimes, though they shouldn’t be well-fed, they shouldn’t be starved or denied a base level of health care.

    I grant that government is too big in some areas, and in the past government action may have been viewed a panacea. I just don’t want the pendulum to swing too far in the other direction.

    Also, I have no problem paying a slightly higher percentage of income tax. Because I’m anonymous here, I’ll be upfront, making six figures, I can part with a little more percentage wise than a good friend of mine who makes about $32,000 and is trying to support his family. It just makes sense. If we can cut unnecessary government programs and reduce my rate, that’s all the better. But we have to address those on a case-by-case basis.

  9. Jace Walden says:

    Sen. Douglas and Rep. Davis, on the other hand, have to be two the most backward-thinking, politically deaf, and obstinante politicians I have run across.

    RiverRat,

    I guess it’s pretty easy to blast guys like Douglas and Davis from behind a pseudonym like a coward…

    From your post, it’s also easy to see why Democrats will remain in the political backwoods for many years to come. I don’t see how someone could call a proposal to eliminate a tax with NO constitutional authority (Income Tax) “backwards” thinking. Additionally, I don’t see how someone could call two men who have pushed to have the voter’s voices heard on the commuter rail issue as “politically” deaf.

    But then again, you are a river rat.

  10. kspencer says:

    Chrisishardcore, a couple of things need corrected. First and foremost, the flat tax proposed by Mr. Davis is not the same as the one submitted at the federal level. This creates some changes in the way previous arguments have flowed.

    A big thing is that unlike the federal version, “used” products aren’t exempt. So your rich man buying a “used” Lexus still pays sales tax. On the other hand, since this bill is also missing the ‘intent’ clause, there is nothing preventing the company for which he works buying or leasing the Lexus (without the sales tax) and letting him drive it as an income-equivalent benefit option

    I do think that Mr. Davis tried to close one “rich man” loophole by requiring taxes on things purchased out of state. However, the way it’s worded may fail a federal challenge, and certainly creates interesting problems for tourists and temporary residents such as students. In particular: anything purchased outside the state and used later within the state is subject to sales tax. If it was purchased more than six months ago the tax is based on the fair market value of the item. In other words, a UGA freshman from another state who brings a car has to pay Georgia sales tax on that car.

    I’d like to point out a fascinating flaw in the draft. As written, any airline ticket with an origin or destination of Georgia might be subject to this sales tax. Likewise, any retail sales of goods from Georgia businesses to end-users anywhere else might be subject to these taxes. I say “might” because of a clause that keeps repeating: no sales tax will be applied if the retail purchaser is not subject to sales taxes. (Yes, it’s confusing and seems to be recursive.) Thing is, these clauses keep popping up when the sales discussed are to intermediate businesses that are subsequently selling to retailers. Mostly.

    Kirk

  11. kspencer says:

    One more interesting difference between Davis “fair tax” and the Boortz-Douglas version. Rep Davis’s version leaves OCG 48-8-3 unedited. That’s the “sales and use taxes levied or imposed by this article shall not apply to:” section – the list of things that are sales tax exempt. Such as purchases by government (fed, state, and local); non-profits; religious institutions; and so on.

    So businesses quit paying. The rich pay less. But the end result is supposed to be income neutral. Which means the poor and middle class pick up what the rich and businesses quit paying.

    No thanks.

    kirk

  12. DTK says:

    “Our neighbor to the north, Tennessee, has no income tax, but also features a yearly budget crisis and chronically funded public education to boast as its successes.”

    I also lived in Tennessee and can guarantee that Tennessee’s problems are due to spending, not revenue. Depsite having a popluation that is one-third LESS than Georgia’s, Tennessee has a budget that is one-third MORE.

    Let that sink in. Georgia has a population of a little more than 9 million, while Tennessee has about 6 million people. But Tennessee’s budget is almost $26 billion, while Georgia’s is about $18.5 billion.

    Most of the problem extends to TennCare, which is their extended Medicaid program. TennCare covers 1 million people who are not eligible for the federal program . About 25 percent of the state’s population has their health care paid for by either the federal or state government. In some counties, such as Grundy, 40 percent of residents don’t pay for their own health insurance.

    That’s why Tennessee is broke, not because of the tax system.

  13. Demonbeck says:

    What is amazing is that Tennessee has $26 Billion to spend without an income tax, while Georgia only has $18.5 Billion with one despite having 3 million more people.

  14. bird says:

    DTK, re: Tenn. v. Georgia.

    I’m a little confused on the numbers. I found this comparison, which, for FY 2005, has Georgia with $16.8 billion in revenues and $16.4 in expenditures; Tennessee had $9.3 billion in revenue and $9.1 in expenditures.

    See p. 31 of this report prepared by the National Governers Association and the Nation Association of State Budget Officers. http://www.nasbo.org/Publications/PDFs/FiscalSurveyJune06.pdf

    What are you looking at?

  15. kspencer says:

    Actually, those comparing the two state budgets would be advised to look a bit deeper.

    The $26B of Tennessee is TOTAL appropriations/expenditures.
    The $18.5B of Georgia is STATE appropriations for expenditure.

    Either Tennessee should be considered at ~$11.5B OR Georgia should be considered at ~$34.4B. That’s the effect of including (or not including) Federal and Other funds from each budget.

    So it’s either TN at $11.5 vs GA at ~$18.5, or it’s TN at ~$26B vs GA at ~$34.4B.

    By the way, that’s using the official budgets for this year of both states. Page 39 in the TN budget, page 29 in the GA budget.

    Kirk

  16. Michael C says:

    kspencer, I am not even going to comment on Rep. Davis’ proposal because I have not read it. But I must take issue with your statement:

    So businesses quit paying. The rich pay less. But the end result is supposed to be income neutral. Which means the poor and middle class pick up what the rich and businesses quit paying.

    Businesses see taxes as a cost of doing business. These costs factor into what that business charges for its goods and services forcing them to charge more. So who picks up the tab? Its the consumer not the business.

    Reducing the cost of doing business is good for everyone.

  17. bird says:

    I hear that argument a lot Michael C., but businesses in reality try to make as much money as they can. The costs of goods is situated to supply and demand. Though businesses might argue that they want to pass savings to consumers, most good businesses try to charge as much as they can for their products, thereby maximizing profits.

    I have grave doubts whether there would be a reduction of prices under a fair tax.

  18. kspencer says:

    Michael C, yes and no. Taxes are ‘part of the cost of doing business’. However, business taxes do not usually get pushed completely onto the customer. In a perfect world they would. Typically, however, when a tax rate is changed the business doesn’t pass the whole change along to the customers. The reason for not raising the whole is that (usually) the increase in price results in reduced total sales for a net loss. There’s a ‘sweet spot’ in there that minimizes the net loss.

    Basically, it’s an application of the supply and demand curve. The customers don’t see the internal expenses. They just see the total price, and that is what cues their demand.

    Kirk

  19. Michael C says:

    bird, I agree that 100% of the savings will not be passed onto consumers. But some will. Some will go into the business owners pocket where he will go spend it, generating more revenue for the state. Some will go to expand business, which mean more employees.

    Your assertion that a rich fat cat will just hoard the money like a scrooge is not accurate. If a wealthy person buys a $1 million boat because he is making more money, then money goes to the boat builder and his employees.

    You gotta love a free-market economy.

  20. Michael C says:

    kspencer I agree. see my previous post.

    Furthermore, Business expansion also generates more for revenue for the state in purchases made by the state.

    Again I have not read this proposal, probaly will not until this weekend, but as a former small business owner, compliance costs were outrageous and complicated.

    There are better alternatives to the current system. If you have one better than the Fair Tax, lets hear it.

  21. kspencer says:

    Jason, thank you for pointing me to the responses. Based on what I’ve read, I’ll say it moots many of my objections. Truthfully, I think my objections are valid, but they’re not Rep Davis’s fault – and ‘the way business is done’ isn’t in keeping with how I’m reading the code. Enough. I’m going to restate the objections – er, concerns – here, but only the ones I see as still applicable. Please don’t respond to the earlier objections as I’m retracting them and you’ll be wasting your time.

    ===
    The result of the increases that will immediately affect me and the people I know are:
    1 – 8 percent sales tax for the state.
    2 – county and locals can push the sales tax to 16% – 17% in some cases. One of the BIG additions they’re allowed to put in without too many restrictions is a 6 (some cases 7) percent tax for trade centers/convention centers/coliseums.

    This means that Catoosa county – my residence – will go from its present 7% to 11%. The current sales tax in Chattanooga – Hamilton County – is 9.25%. The people in Tennessee who make the short drive to Fort Oglethorpe (and Ringgold, and Rossville in Walker county) to save the 2.25% will stop doing so. And a number of shoppers will go the other direction. I suspect the net effect will be to reduce the total revenues for Catoosa county.

    Is there going to be a huge difference for $1.75 saved per hundred dollars spent? no. Will there be some difference? Yes.

    Second objection.

    The 2007 Georgia budget projects that 31.8% of revenues will come from sales taxes and 48.3 from income taxes (4.4% corporate, 43.9% individual). A flat change gives us a budget reduction of 16.5%. Given how tightly we’ve already cut government due to the income shortfalls of the past few years, can we really afford to cut that much? Will taxpayer happiness at keeping ~2-3% more take-home pay outweigh the loss of services plus the ~4% increase in cost of goods and services?

    Kirk

  22. kspencer says:

    Michael C, I disagree with some of your assumptions. That said, unlike the National FairTax plan Mr. Davis proposal is fairly simple to accurately summarize.

    Eliminate income tax.
    Increase sales taxes by 4%.

    Note that this doesn’t get rid of most of the compliance codes to which you object. Just those dealing with Georgia Income Tax.

    Kirk

  23. kspencer says:

    [note to the editors – I’m longwinded, and if you feel I’m unfairly taking your space you’ve my permission to eliminate this post. Kirk]

    One of my problems with the tax code ‘fixes’ is a point of confusion. “what we have doesn’t work” is a demonstrably false statement. Does it provide the state with the revenue it requires to continue operation? Yes.

    Another objection that boggles my mind is the ‘complexity’ issue. There are two facts here. First, all one need do to get a ‘simple’ tax is to use the 1040EZ. You will undoubtedly pay more taxes than you would by taking advantage of the complex forms – which brings up the second fact. The reason for the complexity is that we want to be fair, and want to encourage or discourage certain behavior – and sometimes reward or punish certain groups. Changing the structure of the income will not change the desire to be fair and encourage/discourage/reward/punish. It will appear to do so for a short time, but inevitably the new structure will gain in complexity as it is in turn tweaked for ‘better performance’.

    I think, therefore, that any tax proposal must begin with a definition of what it means by ‘better’. From there two simple tests can be made. First, is the ‘better’ that’s proposed acceptable? Related, is the ‘better’ worth the short-term disruption caused by the change? And second, does the proposal actually meet the goal of ‘better’?

    Michael C has presented an honest request for me to propose a ‘better alternative’. I don’t like the current income tax, but to borrow a phrase, it’s better than everything else. And as to the national FairTax, I’ve responded multiple times that it doesn’t satisfy its own goals of ‘better’. At best, it disrupts the system to end up in a condition just as convoluted. But that’s a separate issue from the current thread.

    Kirk

  24. DTK says:

    Kirk,

    Thanks for catching my error. I was lookng at numbers from different sources that were as different as apples and oranges. I’m ignorant.

    I lived in Fort Oglethorpe for a year as well as in Chattanooga for a year so I share your concerns about where consumers will go if Georgia were to enact a higher sales tax. But doesn’t this cut both ways?

    If Georgia dropped its income tax, would it not help spur a population shift of people living in the Chattanooga area to Catoosa, Walker, and Dade counties? To an extent this has already started. These areas have all experienced a good amount of growth over the last decade, and one of the reasons was the HOPE scholarship. Many southeast Tennessee parents were moving to northwest Georgia to take advantage of the free tuition.

    But now that Tennessee has started its own scholarship, I would think the incentives of moving to Georgia would not be as high. Would free college tuition PLUS no state income tax work to lure middle class families to Georgia?

  25. kspencer says:

    DTK, I think – opinion, unbacked by solid evidence – that while there are several factors that explain the population shift of Chattanooga people into Georgia they can be condensed into one overall explanation.

    Georgia offers better living. However, as I keep saying, you get what you pay for, and you have to pay for what you get. The reason Georgia’s able to offer that better living is because people pay the taxes to get it.

    There’s the schooling. Yes, we comment and complain of Georgia’s overall performance being low on the national scale. But a comparison of Northwest Georgia to Mid-Central Tennessee is no contest – we do better on just about every measure. A not-inconsiderable factor in that is the fact that we get better teachers. The pay difference gives us more applicants, and we get our pick of the litter up here. Yes, we have educational problems, and I’ve my suspicions as to cause, but it’s not the teachers.

    There’s the police and fire service. We tend to have more with faster response per capita. Our pay tends to be better – even after paying the income tax – and because our sales tax rate is lower we get to buy more with what we have.

    College – HOPE – is a draw. But it’s one of several factors. And I strongly suspect that turning Georgia into Tennessee is a bad idea.

  26. Overincorporated Fulton says:

    One more thing I thought I would add to the mix:

    As a recent UGA grad, I have seen the zealotry of conservative ideologues in favor of the FairTax, but rarely hear them address the fact that eliminating the state income tax and placing the revenue burden on sales taxes is tantamount to raising taxes on students, most of whom do not pay state income taxes under the current scheme.

    Some of you may think that college students on the whole are spoiled brats who should probably pay more in taxes than they do (I count myself among this group). However, I suspect that many students who claim they favor a FairTax would not be quite so vocal if it were framed as a tax increase on students.

    I hardly hear the campus crying out, “Raise my taxes!”

  27. LINDA says:

    Legislatures are not looking for a fair tax for anyone. More money is need to meet the spending that is spiraling out of control, and more money will be collected if a so-called fair tax is put into place. Let us work with the tax we have and cut costs 10% across the board.

    A fair tax is a regressive tax that would cripple the economy in Georgia. It hurts the poor and small businesses. If you take money away from the poor in transfer payments to the state, then the federal government will be further burdened with pleas for state and local governments requesting federal grants to help with housing and schools. That money goes through to many hands to get back to the states through federal taxes that comes out of our pockets.

    Just do an analysis comparing progressive taxes vs. regressive taxes, and do some research to see what happens when governments come up with new schemes of taxation. I believe the state tax in Georiga may have started at 1/2 % when first introduced or perhaps 1%.

    We have got to cut spending now!

  28. LINDA says:

    I meant to say the sales tax may have started at 1/2% or 1%, and was not talking about state income tax. Regressive taxes harm the poor and small businesses. Small businesses are the new backbone of the economy, and they most certainly do not need to be burdened with higher operating costs.

  29. Mad Dog says:

    I hate coming in late to these posts.

    But, thought I’d jump in again.

    When the Republicans were cutting income taxes for Paris Hilton et al, how was that supposed to be good for me?

    That would be the selfish question to ask, wouldn’t it?

    But, if cutting taxes for someone that doesn’t work (or does non-productive work) is good for the economy, it should be good for me. Right?

    Is the argument that Paris Hilton would become more efficient in her conspicous consumption? Is it that we just need less wasteful rich kids? Is that what is holding our economy back from being the best in the world etc etc etc?

    So much for humor.

    Now let’s try being serious.

    To study this concept that a fair taxation exists and must be implemented is exciting. But, the current theories being utilized are commodity pricing theories. In commodity markets, the product being sold is homogenous. Buyers and sellers can choose to not buy, or they can be compelled to act with perishable commodities. Peach crop. Watermelon crop. Strawberry crop. Demand can fluxuate wildly. Supply can be predictable. But, the underlying commodity is undifferntiated.

    For example: One ounce of pure gold or silver. One ton of wheat. 1 barrel of corn oil. I gallon of gasoline or diesel.

    The pricing theory being used by The FairTax book is from commodity markets because there are so few variables.

    For example: There is no market for used barrels of gasoline. Used wheat. Used diesel oil. There is only a market for new, unconsumed product. (Used gold or silver would be in jewelry. It would have to be melted back into bars. As long as the bars were unused, they would still be new bars).

    The issue of fairness in our current tax system is very simple.

    The wealhiest people in a capitalistic system have gotten the most from the system. Therefore, they have the most to lose if the system collapsed. So, they should be very willing to pay taxes to keep the system working in their favor.

    Whereas, the poor have gotten the least from the capitalistic system. Whatever is extracted from the poor to support capitalism perpetuates their poverty.

    When somone can articulate how taxes can be fair in a capitalistic system, I wanna hear it.

    Mad Dog.

  30. kspencer says:

    Mad Dog,

    A major problem is that word “fair”. It’s subjective, which means that what’s fair for one is rarely so for someone else once you’re down to nuts and bolts.

    Kirk

  31. Mad Dog says:

    Kirk,

    Very on the point.

    Would just about any tax system would be “fair” if incomes were “fair”…?

    If life were “fair?”

    Most political rhetoric avoids objective meanings.

    I enjoy your posts, as a rule. I don’t want to over generalize.

    Too much is already being said that means too little.

  32. jeffS says:

    Simplify the tax code is a good idea but if you want to preserve public education, leave the property tax for schools alone. Local tax means local control and taxpayer support.

    The GA legislature proposal of replacing property taxes with sales taxes is a bad idea. When I decide to move to North Fulton from Gwinnett, I paid for it. In my situation, for the “same house” I paid an extra $30,000 and annual property taxes are $500 more. However North Fulton government delivers better services. Policies that include valuing home ownership over transient living (e.g. Apartments), and smaller schools make North Fulton schools amongst the nations best. When I get my property tax bill I’m delighted to pay it. Even though it is higher than other counties, it is significantly lower than comparables in the Northern states.

    I’m sure the legislature will propose some sort of system of accommodating historic funding level with the sales tax. But let’s face it, that exercise is fraught with corruption. By separating tax taking from tax spending, people don’t feel that their tax dollars mean anything. They lose touch with the good things their tax dollars do – and make sure it doesn’t get wasted.

  33. JOYCE says:

    Only heard about this once on radio couple of weeks ago; my understanding was 1) do away w/ property taxes 2) 5% + sales tax and 3) 5%+ state tax. I love the idea. Being a 200 + resident of the Cumming area and watching the destructive growth, and having owned land on which taxes increased from $500 a year to $6700 a year, I feel it is a more fair and equitable way for the folks moving here to pay for their fair share of the costs of their moving here. Locals here not only don’t want the growth, but have to pay for it because property values climb; ergo, property taxes climb. For those who hate to leave their lifetime homes, it’s paying for something we don’t want in the first place.

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