Watch Your Wallets, They Want To “Reform” Taxes

Speaker Richardson floated a proposal today that would replace all local property taxes with a 5% income tax and a 5% “consumption tax.”  The proposal raises more questions in my mind than answers.  However, my initial reaction would be “no thanks,” I’d rather decisions about my taxes be made at a local level based on local needs.  Under this proposal it would seem to expand the role of big state government’s power at the expense of local governments, which I suspect may be Richardson’s goal. 

Richardson will also probably run into problems in his own party since it retains the income tax and does not create the sales tax utopia that some like Rep. Earhart, and others wants. 

I also wonder whether the “consumption tax” would have any exemptions as the current sales tax does on things like food and medicine.  The article also mentions that the consumption tax would not only tax goods, but services.  Currently there is no tax on services. So, this is one example of an increase in taxes on things that are currently not taxed at all.

Lastly, what will be this new system’s impact on promoting home ownership?  Property taxes are currently deductible from your income taxes.  Sales taxes are not. 

Also, Adam, I’d also like to point out that even Richardson calls his proposal “radical.” Because it is.

14 comments

  1. Bull Moose says:

    Flat tax is the right way to go.

    The sales tax idea that you call “utopia” is nothing but a pipe dream…

  2. Our current income tax is 6% phased in. But most wage earners end up in the 6% bracket. What is so radically different about a 5% “flat” tax that has exemptions for the poor?

  3. Larry says:

    Property taxes for education and education bond debt reduction amounted to about 60% of our total property tax responsibility. That burden is removed from senior citizen home owners in some Georgia counties. A shift from property taxes to even a small consumption tax, especially if it includes services, will be an additional burden on seniors in those counties. The Governor has said he will work to reduce the tax burden on seniors. This won’t do it.

  4. commonsense says:

    Where does it say the current 6% would be wipped out? Could he really mean to raise it to 11%?

    What would seniors who don’t work do? They pay six now after $35,000 in income, but Sonny wants to make that 0% (like he promised would be the first thing he did in office in 2002).

    Does Mr. Laffer support such freeloading?

  5. Decaturguy says:

    That is a good question commonsense, it is not clear whether this new 5% income tax would be in addition to the current income tax or not. If it is going to replace the income tax then it might have to. This would also affect many middle class Georgians with the federal alternative minimum tax as well, which would be bad news.

    Where are the defenders of this plan?

  6. Decaturguy says:

    I’m sorry in the above comment I meant to say “if it is going to replace the property tax then it might have to.”

  7. Inside_Man says:

    Based on some calculations I did for a paper back in 2005, the twin taxes we are talking about could wipe out the existing income taxes while being revenue neutral. The overall reduction in individual rates will be made possible by taxing a wider range of stuff. I think it will be reliably neutral too, Mr. Speaker doesn’t want anyone to accuse him of raising taxes. As for local control, Decaturguy, speak for yourself: DeKalb’s millage rate is 22 mills. This will also end the practice of stealth tax hikes by local governments.

  8. Bill Simon says:

    Chris, tell me, how are the “poor” defined? Is there a set of rules to go by in an “If…Then…” format that can define a person who is poor?

  9. Decaturguy says:

    The overall reduction in individual rates will be made possible by taxing a wider range of stuff.

    Isn’t that called a tax increase?

  10. Decaturguy says:

    Bill, I guess “poor” is defined by the State of Georgia with its sliding scale of income tax rates. Income over $7,000 is taxed at 6%, there are 5 brakets for income earned under $7,000 from 1% to 5%. Sounds like under Richardson’s plan that would be maintained.

    So the tax would really not be any “flatter” than it is not, other than the rate would be lowered from 6 to 5 % and the consumption tax would tax not only sales of goods, but services as well.

    I’d like to call this Glenn Richardson’s tax raising bill.

  11. GeorgiaConservative says:

    I like the idea of getting rid of the income tax a lot better than getting rid of the property tax.

  12. IndyInjun says:

    What of the fact that the Local, Education, and Special sales taxes, which add another 3% in most counties, use the state sales tax base also? Won’t this mean totally NEW 8% taxes on services that become taxable? Won’t counties collect a LOT more consumption/sale and use taxes on the expanded tax base?

  13. dogface says:

    ON ELIMINATING THE INCOME TAX OR GOING ‘FLAT’

    Here’s what many members of the Majority Caucus in the House are saying — privately of course:

    1) The economist who the Speaker has hired to help implement (1) either elimination of the personal income tax or (2) a “flat tax,” released a study just a couple of months ago, Arthur Laffer, that ranked Georgia #1 in the country for best economic and tax climate and for the brightest economic future. If it ain’t broke — and it ain’t — why fix it?

    2) Georgia is one of only a few states in the nation with a “AAA” bond rating on Wall Street. In part, because of our balanced revenue stream and fiscally responsible spending.

    3) Georgia already has a flat tax. After 7k, everyone is taxed at 6%. Pretty darn flat.

    4) Can Augusta, Savannah, Chickamauga, Columbus, Valdosta or any other part of the state really afford an 8-10% state sales (consumption) tax, with local sales taxes and SPLOST taxes piled on top of that? What could the eventual tax rate consumers in Georgia pay? As much as 15%? And a new tax on services!?! Won’t that drive consumers in masses to other states, especially for big ticket purchases?

    By the way, in that same study, Laffer ranked Georgia 36th in its current sales tax structure.

    5) Ok, so let’s eliminate all sales tax exemptions. A GSU study said that eliminating all sales tax exemptions would generate almost $10 billion in revenue to the state — about the same amount that would be lost in revenue by eliminating the personal income tax.

    EXCEPT, half of those sales tax exemptions CAN’T be eliminated. Many are exemptions for local/municipal, county, state, and federal governments, which, by law, can’t be taxed. Another chunk, exemptions for hospitals and healthcare programs, education and schools. Then another good percentage are there for good public policy reasons, to encourage certain industries, like tech start-ups, agri-business, etc.

    6) Tennessee has no income tax, some argue. Neither Florida. Well, they rioted at the Capitol in Nashville when conservative Republican Gov. Don Sundquist advocated implementing a personal income tax, because the state was BANKRUPT relying on one source for revenue. And Florida has an expansive tax base in its tourism economy. A couple of foreign tourists get shot in Miami, the tourism economy slows dramatically, and so does the state’s finances.

    7) So why push eliminating the personal income tax or going to a “flat tax,” which — again — we already have. The math doesn’t add up. And even if they found a way to force the square peg into the circle, it is risky fiscal policy … for an economy that is the envy of almost every other state.

    So why the need for “radical” change?

    In the end, the advocates of eliminating the personal income tax will have to go back to their Republican party base and face the charge: “You promised to get rid of my income taxes. You failed.”

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