Shocking news: Sonny’s no supply-sider.

May 11, 2009 9:16 am

by Buzz Brockway · 28 comments

UPDATE Via Tom Crawford @ Capital Impact:

Gov. Sonny Perdue will veto cut in capitol gains tax —

Says state cannot afford the revenue loss, which could be more than $1 billion annually . . .

Original Post

I’ve been hearing rumblings that Governor Perdue may veto HB481, a key economic stimulus bill passed by the Legislature last session. HB481 would cut taxes for business and capital gains, a key component of supply side economic theory. Today the AJC points out that Perdue doesn’t consider himself an adherent of supply side economics and doesn’t think tax cuts are a good idea in tough economic times.

“Georgia’s a balanced budget state. And it’s very difficult to do the stimulus-type bills in a state that’s starved for revenue and cash at the same time.

So that kind of destroys a supply-side theory within a state government.”

I wonder, since Perdue has opposed and passed up opportunities to cut taxes even during good times when he ever thinks tax cuts are a good idea? Perhaps Governor Perdue and his economic advisors would do well to read the lectures found here and dig a little deeper, past the left-wing rhetoric, and learn the benefits of true economic stimulus.

Skeptic Tank May 11, 2009 at 9:19 am

Were you completely asleep during the 2005 session when the Lege passed and Perdue signed a huge tax cut for corporations — with an impact estimated at $1 billion over a 10-year period? Perdue evidently thought that tax cut was a good idea.

Bill Simon May 11, 2009 at 9:24 am

Peach Pundit did not begin until right near the end of the 2005 Session. So, that is pre-historic legislation if it did, indeed, happen the way you say it did. :-)

Skeptic Tank May 11, 2009 at 9:31 am

Yes, it did happen that way and yes, I am feeling more pre-historic by the day — which is another way of saying I’m an old fart. ;-)

NorthGeorgiaGirl May 11, 2009 at 10:06 am

I’d say we need to burn up the phone lines telling the Governor to sign the bill, but as Bill Simon pointed out on another thread, he probably doesn’t really care.

I can’t say I’m surprised by the Governor considering a veto of this bill, though I am still very disappointed. Obviously, Governor Perdue thinks the money the state collects belong to the state and not the people who actually make the state work. The bill was sponsored by Graves, Burkhalter, Keen, Earhart and others, and carried by Sen. Rogers in the Senate, so it isn’t like it was some wacky group of “malcontents” who passed the bill.

Obviously, Governor Perdue sides with Nan Orrock on this issue. RINO’s are all the same. When they have an opportunity to prove they really believe everything they campaigned on, they revert back to their true beliefs.

So much for Georgia being different this year and cutting taxes…

Anonymole May 11, 2009 at 11:10 am

In the Governor’s defense, he did sign several important tax-cutting pieces of legislation, including a referendum to repeal the state’s inventory taxes (HB482).

Technocrat May 11, 2009 at 11:58 am

Depending on where you are Georgia [ranks 31= 9.8%] in the middle 15 group of State and local taxes collected as a % of per capita income.
Georgia is 38th in per capita income so +- $100 [10% of $34,500 x 9.8%] is SPOT ON for an ideal tax amount compared to the other 50 states.

Obviously Maine and New York at 12-13% are too high.
Alabama and Tennessee at 8.7% might be too low

http://www.census.gov/statab/ranks/rank29.html

Goldwater Conservative May 11, 2009 at 12:22 pm

Perhaps Buzz and the rest of the rhetoriticians of the right wing will put all of this aside.

Every study of capital gains taxes show the same thing…cutting them does not encourage investment. It does provide a bit more of an incentive to dump your investments when capital gains taxes are low…this incentive is mirrored by higher capital gains taxes encouraging investors to ride out tougher times with a company.

Regardless, supply-side economics does not explain a whole lote. It is a normative theory of sorts…it does not take into consideration actual economic behavior. On top of all that…it is dead. Supply side economics died not too long after Reagan got into office. Taxes were lowered past the optimal rate.

Bill Simon May 11, 2009 at 12:35 pm

Peewater,

It does provide a bit more of an incentive to dump your investments when capital gains taxes are low

So, when the capital is sold at the lower rate, what, do you suppose, happens to that capital that has been generated? Is it just pissed away on cigarettes?

Or, is the more likely scenario is that the owner of that capital goes off and searches for a new idea to invest that capital?

I know that in your mind…everyone should just give all the money to the government.

Buzz Brockway May 11, 2009 at 12:43 pm

GC,

Sonny didn’t veto this because he was worried about investment levels, he was worried about the impact on State revenues. Sadly, the Governor appears unaware that cutting capital gains almost always results in more revenue to the Government.

Supply side economics is not dead, but it’s certainly unfashionable as is capitalism in general these days. Don’t worry, it’ll make a comeback when we awaken from this economic nightmare we’re enduring.

aquaman May 11, 2009 at 1:01 pm

“is SPOT ON for an ideal tax amount ” I would submit that a fair/ideal level of taxation would be the amount required to pay for the things government is intended to pay for not some % based on other spendthrift state rates. I assume Sonny needs the money to finish the boat ramps.

Goldwater Conservative May 11, 2009 at 1:51 pm

No Buzz, it doesn’t.

They were saying the same thing up until 1981 about cutting capital gains taxes. They were cut too much and revenue plummeted (regarding that particular tax).

Again, this is no exact science. At times, perhaps now, people will be dumping their investments often and getting hit with capital gains taxes more often. Only then will slightly cutting the cap. gains tax generate more revenue. All in all, there is no significant correlation between capital gains tax rates unless we are talking about a huge cut…say 10%points.

We are already running a deficit. Zero-based budgeting will not save that. Cutting cap. gains taxes will, in all likelihood, lower the total revenue for the next period (however long that maybe). If anything, and I hate agreeing with Perdue, this is a look to the long-term.

Supply-side economics as a political matter is dying. My savings are not trickling down to you…they never have. My debt might, if I were a baby boomer and had a lose personal ethic regarding passing debt on to future generations. The only thing that trickles down is cost. Capitalism will never die and is as popular as ever. There are many forms of capitalism though. Market and Corporate capitalism are dying…which is a good thing. Do you like having recessions every decade? I don’t. I don’t like bubbles either. We are finally going back to our social-capitalist model and believe me…the next bubble, energy, after the burst in 5 years, will unmake this country.

John Konop May 11, 2009 at 2:02 pm

Goldwater Conservative

I can only speak from my experience raising money. Anything that helps in a material way with a ROI on investment capital helps a lot. It is very difficult to track the exact reason why someone invest in fact it is usually a combination of reasons.

And it hard to argue a low capital gains tax would not have a material affect in attacking investment capital especially in this environment with debt to equity ratios so tough on business now for debt.

John Konop May 11, 2009 at 2:25 pm

sorry

….and it is hard to argue a low capital gains tax would not have a material affect in attracting investment….

Daniel N. Adams May 11, 2009 at 3:16 pm

Shocking news: Sonny’s no supply-sider, constitutionalist or free marketer… who knew? WE DID!

The GOP-socialist party (as opposed to the Democrat-socialist party) continue to revel little difference between the two… if any.

Who will be the next Sonny “A. Spector” Perdue that the GOP chooses in their primary to challenge for governor of GA?

Nevermind… this is getting so easy it’s not that fun anymore.

Skyler Akins May 11, 2009 at 5:36 pm

I’m glad Gov. Perdue had the balls to do the right thing!

Harry May 11, 2009 at 6:28 pm

I agree with Perdue. Taxpayers need income tax rate reductions, not special carve-outs for employers or classes of business. More cuts in state spending is what’s required….then we can lower overall tax rates (which is truly stimulative across the boards) and still have a balanced budget.

Jeremy Jones May 11, 2009 at 6:33 pm

I believe businesses should have an income tax of 0%. As many people know, businesses do not pay taxes, their customers, the consumers, pay them through higher prices for goods and services.

Cut state business income tax to 0%, and watch the growth in our state.

John Konop May 11, 2009 at 6:42 pm

Jeremy Jones

Please tell us what you would cut out of the budget and or what is the off set tax revenue?

debbie0040 May 11, 2009 at 6:45 pm

Even JFK believed in Capitol Gains tax cuts.

Hmmm.. wonder if there will be protests at the GA GOP convention over his veto?

Dash Riptide May 11, 2009 at 6:55 pm

As many people know, businesses do not pay taxes, their customers, the consumers, pay them through higher prices for goods and services.

Strictly speaking, that’s not necessarily so. Who really takes the hit depends on the elasticity of demand for what a particular business offers. That said, I do agree that businesses should not pay taxes over and above what the respective owners of those businesses have to pay. Businesses don’t make money. People do.

Goldwater Conservative May 11, 2009 at 8:14 pm

Good business with potential for profit attracts investments…not tax rates.

Goldwater Conservative May 11, 2009 at 8:16 pm

debbie,

JFK believed in lowering them from the 90% level they were at when he took office. I agree. The pre-Kennedy rates were too high. So were the pre-Reagan tax rates…pretty much across the board.

I almost always agree with those statements. I do believe, however, that Reagan brought to taxes to levels that were too low. We can’t cut taxes until there is nothing left.

tocallaghan May 11, 2009 at 9:13 pm

The problem with most supply side economist is that argue for tax cuts based on an increase in revenue for the government as opposed to arguing that taxation in any form is theft. Taxes should be cut even if it means a decrease in revenue for the government. Every Georgian and American should be entitled to all the fruits of his labor.

John Konop May 12, 2009 at 5:30 am

Goldwater Conservative

In raising investment capital most VC want to see a 3 to 5 year exit strategy. That is how a capital gains tax rate would be part of the puzzle.

jsm May 12, 2009 at 8:16 am

“Taxpayers need income tax rate reductions, not special carve-outs for employers or classes of business.”

Income tax rate reductions won’t matter to people who are unemployed. When you relieve taxes on a business, it can grow and hire employees. Those employees pay taxes–income, sales, property, etc.

Helping businesses in this state is a good thing, and HB481 should be law.

Anonymole May 12, 2009 at 8:50 am

Again, as I said before,

“In the Governor’s defense, he did sign several important tax-cutting pieces of legislation, including a referendum to repeal the state’s inventory taxes (HB482).”

Cutting inventory taxes is a huge bonus for businesses.

Bill Simon May 13, 2009 at 12:26 am

For those who are left in operation after this year with inventory….

Anonymole May 13, 2009 at 7:52 am

Those who go out of business wouldn’t get much help from the JOBS act either though…not that the current economy is Sonny’s fault.

Also, keep in mind that the repeal of the inventory tax will help to attract new businesses to the state. Georgia is currently the only state in the SE with an inventory tax.

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