The Tax Reform

Image As Buzz Jason mentioned earlier, a lot of folks are coming out now after the Speaker’s new tax plan. I’d consider this Georgia Trend article a must read on the subject.

In theory, I think the Speaker is on the right track. More and more, taxes are not paid very equitably in the state. Here in Bibb County, a lot of property owners on the north end of town, who pay about 60% of the property tax revenue, find there money being spent more and more in ways to benefit others in ways the northern part of the county can’t take advantage of. In fact, repeatedly on city council in Macon, there are efforts to raise property taxes and, on occasion, members of council will be so bold as to admit the truth that their constituents won’t be affected by the property tax increase.

At the same time, the voters have a chance to vote out the people mis-spending their money, as they did in the municipal elections this year. Likewise, sales taxes going to the state to be funneled back can create room for lots of corruption and trouble. I think Bill Shipp probably goes too far (though only a little bit) in his hyperbole, without seeing exactly the mechanism for distribution, but as Bill Shipp knows all too well, and as we all know too well, if the local governments cannot control their taxes, they stand to become even more subservient to the state — the same state that shifted One Georgia Grant money from its intended purposes to AFLAC, thereby freeing up AFLAC to get a NASCAR sponsorship.

32 comments

  1. Decaturguy says:

    Why is Speaker Richardson such a big time advocate for big state government? I mean I can understand the motivation for wanting a lot more power and all (having the power to dole out money to local governments as he sees fit), but, come on, really.

  2. eehrhart says:

    Neely’s last comment speaks volumes!

    He says:

    “This is a major danger in this proposed constitutional amendment”

    He is from the school of thought that finds the citizenry voting on how best to tax a:

    “major danger”

    Property taxes are offensive and the people of Georgia want relief. In poll after poll of taxpayers this is an 80% issue.

    I for one trust the people and not those who want to expand government on issues of taxation.

  3. eehrhart says:

    The biggest change is that local governments will now have to tax the citizens upfront if they want more money through any number of avenues such as local sales taxes or bonds. They will no longer be able to rely on the backdoor increases of assesment increases on real property. There is truly no shift in power here, that is merely a stalking horse by those who want to continue the offensive property tax. The locals will retain through the plan and statute if successful everything they have now plus adjustments for growth tied to an index. Again the change is only : if they want more from local citizens, they will have to get it upfront where the taxpayers can see it.

    I think most people will agree.

  4. Inside_Man says:

    Mr. Chairman,

    If the local school boards weren’t collecting their operating revenue anymore, and it had to be disbursed from the state purse, wouldn’t it be easy then to allocate funding on a per child basis, such that every child’s funding would be equal (except for special needs) and portable?

  5. dorian says:

    Erick, you can’t seriously think this is a good idea? I mean, come on. This is the most dangerous proposal to come out of any level of government in my adult life. At least in Bibb County, the voters in Bibb County can decide to change the composition of the commissioners office if they don’t like how the money is spent, or if too much is being taken. You’re talking about taking all the decision making power from localities and handing it over to the state, who, can’t even agree on a budget themselves. And, by the way, what will the effect be then when the legislature can’t agree on a budget? Instead of the state government shutting down, every level of government will shut down. Oh yes, then there is the whole issue of devaluing hundreds of millions of dollars of general obligation bonds, and the local governments can kiss that funding source goodbye too. Great idea. The only thing that needs to be talked out is a new speaker.

  6. dorian says:

    You’re right. Instead of “You’re talking about taking all the decision making power from localities and handing it over to the state”, I should have said “You’re talking about taking most of the decision making power from the localities and handing it over to the state”. Then, of course, there is the whole issue as to whether or not to send them any money at all. If the legislature doesn’t like how a commission acts, can they refuse to fund them? Of course not. They always act in everyones best interest, and would never, ever withhold funds to anyone to settle a political grudge. That never happens.

  7. The Comma Guy says:

    The Legislature already shows that it is willing to fund projects of those members of the party in power at the expense of spending money equally across the state. What is to stop them under this new tax scheme from giving extra money to a county or city in favor and reducing the amount available to a disfavored area (i.e. Paulding County gets money for new school equipment but the City of Atlanta’s request is reduced or denied outright).

  8. drjay says:

    the part about sales taxes being assessed on services is utterly absurd and a back door stick it to you for middle and upper middle class folks–as a dentist i do not want to be responsible for collecting sales taxes—how will that effect insurance reimbursement? medicare and medicaid? the other services that will also be taxed like financial planners, lawyers, accountants and the like are generally accessed disprorportionately by the not poor as mentioned above…

  9. grabbingsand says:

    Less Taxes
    More Freedom

    Less platitudes, please.

    You can vote Libertarian at every poll, but the sheer fact remains that we the people must endure or enjoy the politicians currently at hand.

    That being said, I suppose it is always easier to just say “If only” and “I told you so” without ever offering any real solutions.

  10. Roadkill says:

    The sweetheart exemptions from sales tax takes up 22 pages in the Georgia Code now, with no fewer than 10 being given away last session. I have no doubt that not all of those will be eliminated, and the list will begin to grow immediately as lobbyists pay politicians for new exemptions for their clients. Soon, the unconnnected will again be paying most of the tax.

  11. Donkey Kong says:

    drjay,

    I love going to the barber and not having to pay sales tax on the haircut. But let’s realistic. Our economy has steadily shifted from a goods-based to a service-based economy. To shy away from taxing one large segment of our economy while taxing another is inequitable. Every citizen receives benefit from the taxes, but only certain consumers pay it. The current sales tax system “sticks it” to the poor more than the rich, in terms of dollars paid in sales tax to dollars spent. The rich tend to pay more in services than the poor. Who goes to financial planners, accountants, etc.? Slum tenants?

    Cutting spending and taxes is one of my most important policy issues. Successfully decreasing the footprint of taxes requires it to be equitable. We need to make the tax base as broad as possible to minimize its impact on our economy and to simplify the process (remember, simplification = saved time + saved money).

    Property taxes run into the same problem. The taxes are assessed only on property owners. This was a fine conception when only property owners could vote–tax those who receive the benefit. Since we live in a democratic republic where all law-abiding citizens 18+ can vote, property owners should not bear an additional tax burden. By eliminating property tax, the state is increasing the visibility of taxes and broadening the tax base. As conservatives, both should be proper goals (so long as the tax rates fall proportionally to, or greater than, the tax base widens).

    Some critics argue that the cost of property taxes is simply passed on to the tenants. In high population, low market saturation areas, this is true. If an area has high demand for rental housing, landlords have more say in pricing decisions. If the housing market is saturated and price is market-dictated, however, landlords cannot compensate for taxes.

    Let’s be clear–I believe in letting the free market work. If a market is over-saturated, it won’t stay that way for long as landlords will soon go out of business or cut their losses and move elsewhere.

    The problem lies with the unpredictable assessment of property taxes. Leases are semi-long term. That’s not a problem, except when the government unpredictably assesses property. A friend of mine owns some commercial and residential rental real estate. Last year, the local authorities reassessed his property, literally doubling his taxes for the year. Now, he had anticipated an increase of property taxes based on the looming assessment, but he had to scramble to find the cash needed to pay the tax bill. Further, his profitability margins were cut badly because many of his leases are over multiple years, and he cannot adjust his rent price on many of his tenants for at least a year, many of them 3-5 years. Sales taxes are predictable and transparent–this lets business owners and consumers more accurately budget their expenses.

    A sales tax replacing property tax would be efficient and transparent. If the House can create a safeguard against letting localities come in the crossfire of their political warfare, this seems like the logical choice.

    grabbingsand,

    Newt offers real solutions. All other candidates are nothing but Platitudinons.

  12. Inside_Man says:

    Roadkill,

    You couldn’t be more correct. Nothing makes a lobbyist lick his chops like cutting a sales tax exemption out of a tax bill. Our current crop doesn’t have a stellar record when it comes to ignoring special interests, so my prediction is that whatever bill comes out will be so full of holes you could drive a truck through it.

  13. dorian says:

    I agree that there are problems with the property tax system, but you don’t fix something that is broken by breaking it more. Moreover, I have a lot more confidence in my ability to influence a local tax assessor than the Georgia House of Representatives. If I can’t, then I can sue in Superior Court. With this scheme there is no recourse, for anyone. Tell me something, what has a politician, any politician, done lately to deserve this “trust us” mentality to deserve us handing over running our county governments to them? Anyone? This plan is bs, and it will still be bs no matter how many words you use to say it.

  14. Donkey Kong says:

    “This plan is bs, and it will still be bs no matter how many words you use to say it.”

    If this plan is bs, please explain to me how/why I’m wrong. I’m all ears.

  15. IndyInjun says:

    OK, as a long term and strident critic of the Laffer/Richardson/Fleming “tax reform?????” initiative, I will meet the challenge of those claiming that I have no solutions, by posing some.

    If the Georgia General assembly is SERIOUS about tax reform:

    1. Join the cooperative effort of 37 sister states with the STREAMLINED SALES TAX PROJECT which simplifies and unifies the sales tax rules among states. See http://www.streamlinedsalestax.org/

    Cooperative efforts would allow GEORGIA to collect USE TAX on internet sales. It would allow collaborative efforts with sales tax auditors of the other states to collect $tens of MILLIONS of taxes already due and not being collected.

    2. REFORM THE PROPERTY TAX SYSTEM Eliminate the conservation use exemption which shifts $HUNDREDS OF MILLIONS in property taxes from land speculators to homeowners.

    3. RESTRICT STATE SPENDING GROWTH TO THE RATE OF POPULATION GROWTH.

    The punishing growth of taxes has come at the hands of spend-crazy GOPers, who now wish to change the subject.

  16. IndyInjun says:

    For another thing, PUT REAL TEETH INTO THE TAXPAYER’S BILL OF RIGHTS.

    As is stands, this “taxpayer protection” is a joke, as the last step is appeal to a Superior Court judge who is charged with establishing the value of the property IRRESPECTIVE OF HOW OUTRAGEOUSLY THE TAX ASSESSOR HAS VIOLATED SAID “BILL OF RIGHTS.”

    The tax assessor knows he can violate the law across the board and all is set anew at the Superior Court level.

  17. Donkey Kong, how can conservatives say with a straight face about almost every corporate tax that it is passed on to consumers but not say the same thing about property taxes for landlords?

    So sometimes the market gets bad and landlords get squeezed … well guess what if you decide to be a landlord that’s just one of the RISKS you take. Welcome to capitalism.

    My biggest problem with the state allocating money to the counties is that if you look you will see that each county spends a different amount per pupil than every other county. So, does that mean we’re going to adopt the new level at the highest current one — tax increases for everyone — or does that mean we’ll pick a middle number, or the lowest number?

    And then what, if the county wants to spend more per pupil than the state formula dictates, can they then levy property taxes on top of the state sales tax revenue to make up the difference?

    And on the flip side of that coin, what about a county who doesn’t need to spend all the money the state allocates…will they just waste it, give it back, use it to offset other local taxes etc?

    If you don’t like paying higher property taxes then vote out your county commissioners or school board members. And if that doesn’t work, move to a cheaper house or a lower tax county. How is it that the party of federalism so clearly understands the beauty of that concept on the federal level but can’t see how it can work on the state and county level? Bizarre.

  18. Donkey Kong says:

    Indy,

    Your proposed changes are much better than the status quo. I would not support the Speaker’s plan unless there was some measure to protect the localities against the whims of the Assembly.

    As much as I love some of our state reps, many of their bills lack teeth. They need to understand that the voters will tolerate [email protected] bills for only so long. The Senate is even worse than the House on this. If history is an indicator, the G.A. will pass tax reform, but it’ll lack teeth, and we’ll be back where we are today in only a few years of special interest legislating.

  19. dorian says:

    Donkey, I could, but somehow I just don’t think you would get it. Mostly, it is a philosophical position that rests on the fact that smaller government is better. Local governments are in a much better position to know what a county needs that a state legislature. The republicans in the legislature are an embarassment. A fact that I have very little doubt will be driven home in November, and I say that as someone who has been a life long republican. They do not deserve this kind of power. I live in a small town, and the people moan about property taxes here the same way they moan about them eveyrwhere. No, the system isn’t perfect, but we have recourse when it doesn’t work as intended. I do trust my local officials much more than my representative and significantly more than my state senator. There is more to this state than Atlanta, believe it or not, and alot of us folks in the sticks still vote. So, you know what? Go for it. An object lesson will follow in the ballots, and then maybe you people will remember who you work for.

  20. Donkey Kong says:

    dorian,

    I too believe local control is almost always preferable to state/national control. But the current tax system is really detrimental to our economy. Yes, we have the largest economy in the world, but it could be much better if we enacted large-scale tax reform. I mentioned before that I would never support this bill unless there was some way to protect local control. The ideal system would be to eliminate property tax, period, and then each locality uses the sales tax to raise their revenue. This would avoid the inequality of property taxes altogether.

    “An object lesson will follow in the ballots, and then maybe you people will remember who you work for.”

    I’m not an elected official, just a voter and taxpayer.

  21. dorian says:

    I didn’t mean to imply you were. “You people” sounded better than “those people”, so I went for it. I was on a rant. Anyway, explain the part about it being bad for the economy? Last week, I heard a representaive mention that we had the 8th or 9th largest economy in the country. Your points, while articulate, are conclusions. Prove it. Statistically, our economy has grown. You can’t possibly know that it would be better with this new scheme. But my God, what a gamble to take. With every life and every local economy in the state. You say you wouldn’t support anything that didn’t protect local control. You know, laws change. It may start out that way, but I am as sure as I am that I draw breath it wouldn’t end that way. The federal government has never done anything to scale itself down. It only gets bigger. With more power and more control and more laws and more regulations. Has the state government? That is the nature of governments. The biggest arrow in their quiver is that of taxation, i.e. the purse strings. There is not any single thing you could do to undermine local governments is to hand that power over to the state government.

  22. IndyInjun says:

    I would like to see local control taken even a step further.

    Specifically, I would propose that the county tax commissioners be given access to the sales returns of every sales taxpayer in their districts so as to ascertain that the local sales taxes are credited to the correct jurisdictions.

    Local governments, especially those in metro areas, but not in the ‘principal county’ within said area, KNOW they are being shorted to the benefit of the big counties.

    The tax commissioners should be able to do this, or to appoint an auditing firm to do this on their behalf.

    If Richardson has his way, this should be mandatory.

    Heck, it should be happening NOW.

  23. Hey Donkey Kong, the great thing about paying property taxes in DeKalb County is that my local county gets the money to spend where I live. So when I used to work in Fulton, I didn’t have to worry about funding their schools which doesn’t benefit me, and then when I worked in Cobb same thing.

    How in the world are counties where more people work outside of the county than in it supposed to pay for things, and when it comes to funding schools or county operations I could choose to live wherever I want but pay my taxes elsewhere. Somehow that doesn’t seem like an ideal situation with 159 counties competing against each other.

  24. Bull Moose says:

    This plan would make cities and counties be more beholden to the powers of those in Big Atlanta and cause them to have to hire more lobbyists and such to get their piece of the pie.

    This to me smacks in the face of Republican philosophy.

    Local government is best and this massive sales tax seems to me to be a way of usurping local authority and instead vesting it in the state legislature.

    However, kudos to Speaker Richardson and the House Members for putting forth a bold start to the tax reform issue. I disagree with the solution, but applaud them on opening the dialogue!

  25. gatormathis says:

    One thing about it.

    Who give a damn what kind of B*ll Shi** ideas he got anyway ………………………..

    any howwww…………..

    or any ways for that matter.

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