Laffer on the GlennTax

Those of us from Georgia who attended The Americans for Prosperity’s Defending the American Dream Summit last week got a chance to talk with Dr. Arthur Laffer, discoverer of the Laffer Curve, and architect of Speaker Richardson’s G.R.E.A.T. Plan.

Dr. Laffer faced a fairly skeptical crowd over this plan. The general consensus among the group was that centralizing revenue collection at the state level and trusting the General Assembly to send it back to the municipalities is a bad idea. I agree with that. However I’m also a pro-growth capitalist and wanted to see if there was any economic data that might support the GREAT plan as a pro-growth measure.

Dr. Laffer made a case that elimination of the property tax would benefit the Georgia economy. It would help the housing market recover by making Georgia properties more economical vis-a-vis the rest of the nation. He also made the case for the revenue neutrality of the GlennTax.

Many of the attendees asked about the Georgia Income Tax and why we aren’t targeting that tax first. Dr. Laffer said that the decision to go after the Property Tax first was a political decision made by the Speaker. According to Dr. Laffer’s explanation, the property tax is the only tax outlined in the state constitution, and as such he said that the Speaker wanted to get rid of that one first. Elimination of the income tax can be done entirely by statute (presumably at a later time).

The thing that sold me against the GlennTax however, is the fact that Dr. Laffer believes that both the GlennTax and an elimination of the income tax would produce the same economic growth benefit. If that is the case, why strip the local municipalities of their ability to raise revenues to the degree they see fit. If Nancy Pelosi proposed we get rid of all state taxes and have the US House of Representatives decide how much of that revenue the state of Georgia got we would be up in arms.

This nation was built on the premise of the government that is closest to the people works the best. We can point to plenty of examples where centralization has reduced local control (US Dept. of Education), why do we want to do that here in Georgia?

26 comments

  1. eburke says:

    I don’t understand why the General Assembly will not start tax reform with the Income Tax which is within thier power to eliminate. The economic benefit is the same and there is no centralization of revenue (and power) in the hands of the State. I am not one for conspiracies but there must be something below the surface at work here. Why is every member of the House already committed to the “Great Tax” without looking at other options.

  2. Painterman says:

    The idea to start with the property tax is to change the way Ga local governments collect revenue. As it is now they decide how much they need and then set their tax rate to meet it. I am checking into this, but I believe that all SPLOT and other such monies are collected by the State and sent back out to the correct countie snad cities. If this is true and we have been working with this system for quite a while I don’t see the problem. We are always going to have to be watchful of our elected officials and how the spend tax monies. I for one hate the property tax and consider it very un-American, that we can be taxed off our property by valuations and millage rates. I am going to wait and see what the final form this takes before I say I’m for it of against it, but I’m inclined to support it as it stands now.

  3. Icarus says:

    Splost monies are collected by the state and returned to the counties because it is the state that has the mechanism for collecting sales taxes.

    However, it is very easy to tell how much money was collected on behalf of a particular county, and all of that money is returned to that county.

    Under the Great Plan, the sales taxes that are collected (with the exception of the Splosts, losts, etc.) are put into a general fund. Each county will not receive what they contribute, but what the state determines they “need”.

    So, the GREAT plan can be summarized as:

    “From each according to his ability, to each according to his need”.

    Does that sound conservative or Republican to anyone?

  4. Painterman says:

    Your assuming that is the way that they will be collected. Laffer, said that a formula was being worked on to make sure that each county got what they received the year before and adjusted for population and inflation. Now if the state would agree to the same formula we could eliminate the income tax in just a short time. The plan expands who is paying in thus increasing the pie size. A lot of people who just pass through the state would be paying more for the services that they use while here. I bet a lot of you who are so foaming againt this are for the FairTax

  5. eburke says:

    Why do they not put anything down in writing to be analyzed. All we have to review is a power point presentation. That is no way to debate important public policy and decide constitutional issues. Put a proposal down in writing and then have some honest debate over all its implications. I don’t trust any government with my money but I at least know where my County Commissioners live and have access to them.

  6. Icarus says:

    It would be easier to support this plan if the FairTax was enacted, because the tax system would be uniform and would not have a lot of the implementation hurdles that GA will face as the only state on this system.

    However, the FairTax does not eliminate state and local taxes, and it does not take all state revenue to the federal government for them to divide and return to the states. In fact, the last version of the FairTax I’m familiar with (I’ve quit following it, frankly) relies on the states to collect the taxes for the federal government.

    I’m more than willing to look at a “final plan” and judge it on the merits. Until then, we only have the comments from the Speaker and Rep. Ehrhart. These comments indicate that the GreatTax will be used to reign in wasteful spending at the local level.

    I’ve chosen to live in communities that have generally low tax burdens, that are fairly well run, and have local elected officials that are generally accountable to their voters. I don’t choose to gamble my quality of life nor that of my neighbors based on the whims, rifts, or ego-trips that occur for 40 days per year under the gold dome.

  7. dingleberry says:

    Plus, Earl Errorhardt and Glenn Marx and the two most liberal members of the Georgia House of Representative Republican Caucus.

  8. dorian says:

    A couple of points about your comments Painter. First, when we are discussing how the state should be funded, we ought not have to assume anything. We ought to know. Are you comfortable making tax policy based on some vague concept? This is what we may do, but in the meantime eliminate property taxes m’kay?

    Secondly, I would not be so concerned about people who live outside this state transacting business in it, as I would those living in it transacting business outside of it. If you live in say Augusta, and you know you can buy all your consumer goods across the river cheaper than you can in Augusta, why shop in Augusta?

    Of course, we don’t know how much cheaper do we? It could be one cent per dollar or three or seven. Refer to the above comments about vague tax policy.

    Finally, while this isn’t a particularly sexy issue, and so it has been glossed over by almost everyone, no one is really talking about the effect of general obligation bonds. A few billion dollars worth that are now unsecured. Not to mention the fact that the rating for every bond will likely change (not for the better).

    Investors will take losses in millions of dollars on these bonds and the municipalities will be saddled with debt that costs way more than it’s capacity to generate revenue. Sounds like a winning combination, so let’s just guess the abstract way this new tax scheme will fix all that.

  9. bsjy says:

    A reason to support the abolition of the property tax is the lesser of two evils.

    Local politicians and state politicians (ALL politicians) are seduced by the power of the purse, and abolition of the property tax would remove the seduction from one (highly populated) level. With only a few pols whose palms must be greased, the “expense ratio” of the Speaker’s plan is lower than the alternative.

    The more noble reason is the unfairness of the appraisal-based property tax system. Housing prices are going down this year but assessments are not, for the local taxing entity wants the cash for its purposes. My house goes up in value just because other people are paying more for the right to be my neighbor and without regard to my income or ability to pay more in taxes. Everybody in the cabal — local politicians, homebuilders and remodelers, real estate agents — wants to “add to the tax base” and “protect our neighborhoods” regardless of the impact on the poorer current residents.

    Any tax collection system will be abused unless there is a strict and simple spending cap like the one passed in Colorado a few years ago. Make that a part of your plan, Mr. Speaker.

  10. IndyInjun says:

    Griftdrift,

    Amen.

    Its politics though, meaning that the effect, tax reform, is something the masses salivate over, when the CAUSE, spending, is untouchable.

    Look what happened when Sonny breached the subject of actually making state employees SHARE some of the $2.5 billion unfunded liability in the employee health program, instead of passing 100% of the cost to the taxpayer. The backlash from the state employees quickly made all the pols flee in terror and make the easy decision to pass 100% on to US.

  11. cheapseats says:

    I frequently attend events where I can chat with my elected representatives – including my House Rep and my state Senator. I see all these people around town. I run into them at games, in the grocery stores, at restaraunts, etc. They are all very accessible to me and they listen and give great service.

    The BIG difference – the single MOST IMPORTANT difference is simply this: I have one House Rep and one Senator. There are how many Reps in the state House? Like 180? There are how many seats in the state Senate? like 56? (my numbers may be off a few)
    At all these same places, same accessability, I see 8 or more of my Commissioners (out of 10) and usually my Mayor, too. I see 6 or more (out of 8) school board members.

    So, no matter how great is your relationship with your General Assembly reps, they represent a miniscule fraction of the decision makers. I have the home phone numbers, addresses, emails, etc. of all my Commissioners and School Board members and know them all (but one) on a first name basis.

    Local is always better! Besides, if you hate your city/county government, you can move about 20 miles away and be in a different jurisdiction and keep your same job, same church, same friends, etc. Moving out of the state is a major, life-changing step.

    No thanks. I’ll stick with the devils I know extremely well.

  12. bsjy says:

    eburke – the TABOR video makes the point. If government is the solution to problems faced by schoolchildren, old folks, transportation, then we always need more money to solve those problems with govt funding. Local problems solved by local people with local funding (the PTA, for example) is the best solution; the anti-TABOR video you posted assumes solutions are found through more “funding.” Just take a look at government schools’ funding and see if you really believe money is the solution to poor edcuation outcomes.

  13. eburke says:

    bsjy,
    I agree with you that more funding is not the answer to any problem. You said it well …”Local problems solved by local people with local funding (the PTA, for example) is the best solution.” I do have concern about taking the ability for local leaders to make the decisions on priorities and funding levels. Centralization does not seem to be the answer.

    I am still a proponent of the General Assembly eliminating income tax and using the expanded sales tax to make up the difference.

  14. Mark Rountree says:

    chaepseats–where in the world do you live — with 10 county commissioners?

    You wrote, “At all these same places, same accessability, I see 8 or more of my Commissioners (out of 10) and usually my Mayor, too.

  15. cheapseats says:

    Mark – hehehe…
    I’m not going to tell you but it shouldn’t be that hard to figure out. How many counties in Georgia have 10 Commissioners?

    Actually, I don’t know the answer to my own question (which proves that I’m not an attorney) but I know of at least one. 😉

  16. Mark Rountree says:

    nice play, cheapseats!

    hmmm…i guess partial representation of said county does not count? (legislative district)

  17. Bill Simon says:

    10 commissioners? Boy, that’s a spread of power, isn’t it?

    Fulton doesn’t have 10
    DeKalb doesn’t have 10
    Cobb doesn’t have 10

    And these 3 count as the most densely populated counties in Georgia. What is it, a county that has 50,000 residents that has 10 commissioners?

    Nice spread of government responsibility there. It’s a wonder anything gets accomplished.

  18. cheapseats says:

    Mark – I think you’ve figured it out!

    I guess it would be more accurate and fair to say that none of your candidates have ever won this county. Of course, some of your guys have won the other counties that gave you the overall win.

    ‘Nuff said. I think you know.

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