Georgia needs substantive tax cuts, not gimmicks

While they are increasing taxes and fees at the same time, Georgia Republicans are pushing some tax cuts through the legislature:

Nothing salves the bite of a bunch of nagging state fee increases like the promise of little tax relief.

And what better time for a tax cut – especially for the elderly who tend to vote in large numbers – than an election year.

On the 36th day of their 40-day session, lawmakers tacked tax cuts onto a bill that would increase dozens of user fees and slap a so-called bed tax on hospitals. The fees and increased bed tax would help fund a proposed $17.8 billion state budget that the House also approved on day 36.

Combined, the tax breaks would cost the state $387 million over five years, said House Ways & Means Committee Chairman Larry O’Neal (R-Bonaire), who said the cuts should attract higher-income retirees to Georgia. That would boost the state’s overall economy, O’Neal argued.

Seniors and property owners wouldn’t see any savings before January 2012 and wouldn’t get the full benefit of the tax breaks until January 2016.

One provision would eliminate a small portion of property taxes that go to the state, saving property owners a few dollars a year by some estimates.

There is nothing substantive about a tax cut for some Georgians. It’s not a broad-based tax cut. This an election year gimmick and a poor attempt at settling concerns of fiscal conservatives who have watched the budget grow at an unsustainable pace until the crisis hit last year.

The property tax cut is a good idea, but it doesn’t amount to significant tax relief. However, it could have been part of an overhaul of the tax system, which the legislature may take on in the next year or two anyway.

Tax cuts are great, and I think I speak for the fiscal conservatives here by endorsing the idea of lessening the tax burden, but make these cuts broad-based, significant enough to have a positive impact on all Georgians.

46 comments

  1. Lawton Sack says:

    Simply put, for any tax cut to work there has to be an equal or greater cut in spending. You can never count on in an increase in revenue. That is fiscally irresponsible.

      • Republican Lady says:

        John,

        I tried several times Sunday to post a statement/question to you but my computer malfunctioned several times and I never saw it appear. Here goes.

        I took economics and statistics in college for the last two of my four degrees but do not care for either subject. My question to you is this: Do you think the economic policies of the FDR era, or the Reagan era, or even those practiced by Margaret Thatcher, would or could work in this economic climate?

        I think government should do whatever it takes to hire teachers, police, and first responders, and let business do what it needs to hire on the private side. With more people working, revenues would flow to the coffers and ease the burden on everyone.

        What say you?

    • MSBassSinger says:

      Yes and no.

      The level of government spending should always depend on what it needs to efficiently and effectively carry out its Constitutional (Federal or State, local government charters, etc) duties. In reality, that is way more than it spends now, so spending cuts are a fiscally conservative thing to do on the basis of government spending money on things that are not its responsibility, and there is no reason to wait, nor tie it to tax cuts.

      Tax cuts initially lower revenue, but within a year to two years, the revenue increases. So long term, tax cuts usually generate increased revenue. But short term, revenue does drop. That should be an incentive, but not a reason, to cut spending.

      I agree that tax cuts, without cutting spending to match Constitutionally required duties, will cause a drop in revenue initially, and will greatly dampen the long term benefit of tax cuts. Look at what happened when Reagan got a Democrat Congress to lower taxes on the promise of cutting the growth in spending. the taxes were lowered, revenue was down the first year or so, and by the end of Reagan’s term, revenues had nearly doubled. But the Democrat Congress increased the rate of growth of government spending significantly, which only increased deficits, when had they kept their promise, we would likely have had balanced budgets by the end of Reagan’s term.

      A fiscally conservative approach, as I see it, is to:
      1) Cut spending to spend only what is Constitutionally required, and,
      2) Cut taxes and level the percentage everyone pays – no free rides except for the most exceptional of cases.

      Those who advocate tax cuts alone raise the same red flag to me as those Obamacrats & Rockefeller Republicans who advocate deficit spending under some Keynesian delusion.

      • Lawton Sack says:

        My assertion is just not to assume a revenue increase. I know the historic data used for Coolidge’s, Kennedy’s, and Reagan’s tax cuts. I also know that we are currently seeing a decrease in revenues under the same tax system that produced surpluses. In a State, like Georgia, that has a balanced budget system, it is fiscally responsible to take on equal or greater spending cuts when cutting taxes. That has at least a zero impact and a tremendous upside if revenues do increase.

        I totally agree with your statement that government spending should be as low as possible and there should be a balancing of the tax burden by as many citizens as possible. Taxes and spending need to be as low as possible while insuring those Rights that you mentioned.

        I just hope we learn a lot of financial lessons from this economic downturn and that we can prepare better in the future. It was also be nice to have another leader like Reagan or Kennedy that could produce confidence in America again.

        • John Konop says:

          The revenue from the Bush and Clinton years was driven from government backed debt, that any rational person who understands economics could see never could get paid backed. The government than expanded services based on a growth level that was unsustainable since it was driven by irrational debt not real productivity. Finally the government pushed off future liabilities on a state and federal level especially in the healthcare arena in an irrational and irresponsible level that would put someone in the private sector in jail.

          The problem is we have and are living on a credit card from China. And we have future liabilities that will surpass any rational limit in the next 10 years. I realize I have been making this point for years and it is not popular.

          I will say it again, we must pay our bills. And we can argue all day about how we got here, but the truth is the credit limit limitation is coming soon.

          Any rational economist will tell you that we need a combination of cutbacks and increases on user fees and or taxes on a state and federal level. If we had dealt with the problem years ago we could have avoided tax increases and or user fees. But the horse is out of the barn. And I challenge anyone to show me we REAL MATH how we avoid not doing cutbacks and raise taxes and or user fees!

          • MSBassSinger says:

            I think we all (posting on this thread) vehemently agree we need to cutback government spending, and in large numbers, to the point we can start to pay down the debt.

            However, it is only Keynesian economists that see raising taxes as part of the answer. And Keynesian economics has been a failure.

            At any given moment, there is a fixed amount of money (of course, that amount changes over time). There are two entities that can use that money – the private sector and the government. The private sector can increase GDP – the government cannot. The more you tax, the larger the government share of the money supply, and the smaller the share the private sector has. Simple math tells you that there is less money to pay down debt when you decrease the amount available for the only entity that can grow the GDP.

            Here is your real math:
            M = Money Supply ($ at any given point in time)
            P = Private Sector Share of M (0-1)
            G = Government Share of M (0-1)
            T = Effective Avg Tax Rate (0-1)

            (P + G) = 1
            (P + G) * M = M
            G = P * T
            by substitution,
            (P + (P * T)) * M = M

            Thus, as T increases, M decreases. As T decreases, so long as it is not below a level necessary for G to do its Constitutionally mandated duties, M increases. Clearly, if G drops below those levels, there is not a safe and free environment for P, thus negating P’s ability to grow.

            I did not include the debt separately, since that is a government expenditure, and thus falls under G.

            Now if you want to argue that the private sector does not have a tremendous ability for growth in the US, or that government does indeed grow GDP directly, you will have to fight over 200 years of historical evidence to the contrary.

            The traditional American form of free enterprise is the best known process to harness man’s inherent and immutable tendency for greed to the greater good.

            • John Konop says:

              MSBasssinger,

              What I am saying is because of the growth of GDP was driven by out of control debt in the private and public sector that the data is misleading when looking at revenue. Also our economy is consuming at 5 % more than we are producing and most economist on either side agree this is not sustainable.

              The money was already wasted and China is the one keeping us a float. And the government on the state and local level has already committed to the future liabilities the biggest being healthcare for retires ie government workers healthcare. Medicare, VA…….

              And all of the above programs are grossly under reserved and if done in the private sector you would go to jail. Now the reality is we can tell everyone we are going to default on the above and people will get pennies to dimes on the dollar at the rate of growth when it blows up.

              At the end of the day no one who has studied the above problem will tell you that we need increases, indexing, cost cuts……..

              As I said show me the math on the above issue without eliminating it how you would balance it?

              And please tell me any economy that has sustained itself at our consumption rate relative to productivity?

              If you are saying that we can do it with no tax increases by eliminating Medicare, government workers pension plans, NO VA……just say it. But unless you are advocating the elimination of the above than it is all words with no substance.

                • John Konop says:

                  MSBasssinger,

                  To be even more direct with the MATH! As you may know we have 18 BILLION dollar future liability in healthcare for government workers in the state of Georgia and only have 4% in reserve. In the real world this is not called a balance budget ie state of Georgia, but your company would be in bankruptcy with balance sheet like that.

                  Please help me understand how you balance the above problem without eliminating it?

                  The scary part is the math behind Medicare is even worse.

                • Dave Bearse says:

                  Federal Debt compared to GDP:

                  Carter 1977-1981: -3.2%

                  1st term Reagan 1981-1985: +11.3%
                  2nd term Reagan 1985-1989: +9.2%

                  Bush 41 1989-1993: +13.1%

                  1st term Clinton 1993-1997: -0.6%
                  2nd term Clinton 1997-2001: -8.2%

                  1st term Bush 43 2001 – 2005: +6.9%
                  2nd term Bush 43 2005 – 2009: +11.2%

                  “There’s an old saying in Tennessee — I know it’s in Texas, probably in Tennessee — that says, fool me once, shame on — [pauses] – shame on you. Fool me — You can’t get fooled again.”

                  Yet they do, year after year. JK, it amazes me you continue to try to refute folks that apparently have been fooled their entire lives.

              • MSBassSinger says:

                No, I am saying that what you quoted is only a small part of what the government spends, whether federal or state. Cut out that which is not Constitutionally mandated, cut out the social engineering spending, cut out all kinds of things that are purely political (such as government contracts that require paying union wages when free American workers can do it for much less), and cut out military spending that is done for purely pork reasons, require families to be financially responsible for their immediate family members, etc. – all this ads up to significant spending.

                There is no logical, reasoned case for tax increases to grow the economy. It has never worked, and never will. Simple math. Spend less, make everyone pay the same percentage, and use the “surplus” to pay down the debt principal.

                • John Konop says:

                  MsBassSinger,

                  You are calling for an end of Medicare?

                  Also remember the less people make the less they pay in taxes. Right now only 50% pay federal income taxes. Lower wages does help tax revenue.

                  • MSBassSinger says:

                    No, you are trying the old liberal trick of having me say something I didn’t say.

                    You are the one who keeps mentioning an end to Medicare. I laid out principles that would lead to cutting spending and paying off the debt over time without deficits and without tax increases. I showed you the math. You did not make any attempt to show my approach was in error. Specifics – that adhere to those principles – would require more time and space than one can get on this blog.

                    I think what most liberals worry about (and know in their hearts) is that if conservatives ever had their way, conservative policies would work and people would be better off, and freer, at all levels of society. Then liberals would have no power to wield in order to control the lives of the populace.

                    • John Konop says:

                      MSBassSinger,

                      Why when you guys get caught talking in circles every time you throw out the liberal card? THE TRUTH anyone who understands the budget issue will tell you the key to get under control is Medicare.

                      If you want to play lets pretend and not deal with core issues that is your GOD given right. But while you fool yourself our country is falling further in the red!

                      BTW when HENRY FORD asked why he pays his workers so much, he replied I want them to make enough money to but my cars. THINK ABOUT IT! DO YOU UNDERSTAND HIS POINT?

  2. Progressive Dem says:

    A tax cut on retired couples earning more than $70,000 that a future governor and future General Assembly will have to deal with is irresponsible. Can anyone produce any economic analyis justifying this decision? This is just seat of the pants thinking. It is BS, stupid and elitist.

    • Dave Bearse says:

      Let us examine the effects of this legislation in dollars and cents:

      1 – Those couple with a modest annual retirement income see no change.
      2 – Those with a comfortable $80,000 in annual income see a tax reduction of $600 (80,000-70,000 x 6%)
      3 – Those with a combined robust $160,000 in annual income see a tax reduction of $5,400 (160,000-70,000 x 6%).

      It’s clearly Georgia GOP policy to reduce taxes for the rich while pushing taxes and costs onto middle class consumers. Remember the proposal to abolish vehicle ad valorem taxes that would maximize taxation of the vehicle of middle class type vehicles? How about charging middle class consumers now for a future nuclear power plant, with big industry given a free ride? Reductions in capital gains taxes, anyone? Who will be paying the bed tax. not seniors on medicare or the poor on medicaid. No, it’ll largely be the middle class.

    • Mozart says:

      What does $70,000 buy in today’s terms, compared to what the dollars of the 1930s welfare state initiated by your FDR purchased, Progressive? Any idea?

      Or, do you suppose purchasing power is irrelevant?

  3. gopgal says:

    Like it or not, the state has to bring fees in line with the cost of the services it provides. In some instances, fees have just become subsidies.

    For example, as Columbus’ Ledger-Enquirer reported, “counties pay the state 4 cents — yes, that’s four cents — an acre for forest fire protection, a rate set 55 years ago. That fee covers [just] 3 percent of the state’s expense. The state has no registration fee for lobbyists, who often profit in the millions from legislation they wine and dine lawmakers to pass. [Bill proposes a registration fee of $300]. There is no license or inspection fee for child care centers. [Bill proposes charging $1 per child per childcare facility — not exactly gouging]. People convicted of drunk driving don’t have to pay the costs of administrative hearings to get their licenses back.” [Yet each hearing cost the state approximately $150].

    The GOP needs to say no to tax increases, but also end handouts.

  4. Goldwater Conservative says:

    We should probably create a new tax bracket of 7% for people that earn $300k+/person or $400k+/couple.

    Then, raise taxes on the lottery by a quarter or two per ticket.

    Then, send the budget to me.

  5. Old Vet says:

    Georgia’s “progressive” tax brackets haven’t been changed since the 1930s, so we are essentially a flat tax state. The common sense thing to do is modernize the tax brackets and increase the percentage on the upper income levels.
    The Governor’s big plans to attract rich retirees to the state is a scheme dreamed up by developers anxious to build gated retirement palaces. Remember the private cities? This is it. But outside of get-rich-quick developer scum, why do we want a large population of unproductive slugs hanging around hogging the state’s pathetic health care infrastructure and waiting to die? Wouldn’t it be better to attract young, active, productive people?

  6. birdfan says:

    At a time when our economy is in decline and there is a severe “budget gap” at the State level, I appreciate the Georgia General Assembly’s leadship by offering tax cuts.

    Some may say it wasn’t enough. However, $387 million over the next four years and wiping out two major taxes (Senior Citizen income and State Property taxes) is HUGE. I appreciate their leadership to allow Georgians to keep more of their own money to reinvest into the economy.

    Adding these cuts with the JOBS bill…and Georgia is on the right track towards recovery, attracting new businesses and citizens, and rebuilding a thriving economy in our state.

    Let’s face it. If there is going to be true tax reform in the State of Georgia (ie. Fair Tax, Flat Tax, or any type of consumption based tax system), then the state first has to become less dependent upon it’s current system that includes state income taxes and property taxes. The General Assembly’s choice to cut the State’s Property Tax helps every one who owns property.

    Could it have been more? Yes, but not without affecting local counties.

    Could they have cut income tax for everyone? Yes.

    However, first focusing on Senior Citizens should allow Georgia to better compete with Florida and attract a group of people who pay for goods and services.

    Taking these two steps forward (cutting income and property taxes) will decrease the state’s dependence upon two forms of unreliable taxes and could lead the state towards a fair and more simple taxation system based upon consumption.

    Thank you to the Georgia General Assembly.

    • Dave Bearse says:

      “two forms of unreliable taxes”….as compared to sales taxes?

      Another repeat it often enough and its true conservative.

    • Jason Pye says:

      Some may say it wasn’t enough. However, $387 million over the next four years and wiping out two major taxes (Senior Citizen income and State Property taxes) is HUGE.

      That is a ridiculous assertion.

      The property tax cut, though broad-based doesn’t provide much relief. After all, we’re talking about a quarter-mill. The cut for seniors is not substantive.

      Simply put, these are election year gimmicks. Like I said, let’s have tax cuts, but they need to have a significant affect on all Georgians.

  7. McDawg81 says:

    Zero based budgeting, government reduction, line item veto, and replace all state tax sources with a State Fair Tax. Methinks these things fix a lot of ills in our govt.

  8. birdfan says:

    Dave –
    If you get rid of the income tax (which punishes those who are productive in our society) and the property tax (which punishes those who purchase their home, land, or businesses), then you would offset the revenue through an increased sales tax on all goods and services. There are some goods that are not taxed in Georgia…it would bring them into the mix.

    Also, this process would allow businesses to reinvest into their own business…creating more jobs. Also, individuals with more disposable income would reinvest into the economy. We are a consumption based society.

    Another ill that this would address is those who currently receive wages but are not filing or reporting the income (ie. under the table wages, illegal residents, etc.).

    • John Konop says:

      BF

      You Said:

      ….If you get rid of the income tax (which punishes those who are productive in our society) and the property tax (which punishes those who purchase their home, land, or businesses)….

      THE MATH:

      On a 300k home you pay an extra 90K via a Fair tax rate and many admit the number is higher that that. The property taxes on a 300k home are less than 3k in Cherokee county a year.

      Please help me understand how it is better to pay an extra 90k for a home plus interest instead of 3K a year in property taxes?

      Any logical person would conclude your concept would drop the value of real-estae substantially hurting property owners.

      • Does the Fair Tax really propose charging a sales tax on real estate transactions? That’s something I totally disagree with. You can’t reasonably expect someone to pay $90k in taxes at the time of purchase. People don’t buy houses for the long term anymore, and this would cut out quite a bit of real estate investment. Even a $100k home by that figure would have to pay $30k in taxes. Not gonna happen.

        • ByteMe says:

          Of course it’s not gonna happen.

          Have you bought the book yet? Have you? have you?? Well, then, you don’t understand the Fair Tax!

          Sorry, just channeling the unthinking idiocy for a moment.

          • GOPGeorgia says:

            From what I have been told, yes, they would charge tax at the time of the sale. However, the house should cost less because all of the taxes that were added when you bought the lumber, sheetrock, PVC pipes, heating and air units and so one would no longer have taxes on them and the house would cost less. I would think that the market would step up and offer to roll in the sales tax on a house and finance that as well.

            I’ve read the book and don’t remember if it applies to used houses and cars or not. I need to brush up on my stuff that’s not likely to happen.

            • So what about land sales? As far as I can tell there wasn’t any lumber, sheetrock, PVC pipes, heating and air units, etc. that were purchased to create the land. As an example, we’re under contract to purchase 30+ acres in Cobb county right now that has a house and a barn on it. The majority of the value of the property is in the land, not the house. But I don’t feel that it’s right to add on a 23% or 30% tax on top of that just because we’re buying a piece of property. Now, if we’re talking McMansions on quarter acre lots, that’s another situation altogether…

              • John Konop says:

                Under the Fair Tax your new loan which would be subjected to the 30 cent on a dollar increase via your monthly payment. Run that on your calculator over 30 years! As the payment goes up via the tax any logical person would tell you your value would go down.

                And as I said it would create even more defaults via value dropping which would create a race to the bottom on your home equity.

    • Dave Bearse says:

      birdfan:

      Taxing capital or property versus consumption can be debated, but its pretty well established that property and personal income tax revenue are less volatile than sales taxes, hence my reference to “unreliable”.

      Homestead exemptions reduce property taxes and thereby reward homeownership relative to renters that are indirectly paying the higher taxes via their rents. The deductibility of property taxes for income tax purposes likewise offsetting property taxes in a way that is not available to renters is a reward.

      Then of course there’s mortgage interest deductibility. I grant that it rewards home acquistion with borrowed money, not ownership, but it’s an substantial indirect benefit for most homeowners, at least at some point in time.

      How do property taxes punish those that own land or businesses relative to those renting or leasing land and equipment?

  9. birdfan says:

    John Konop
    The price of homes are part of the competitive market. For example, the prices of homes have dramatically decreased over the last few years in metro Atlanta based on supply and demand. The sales tax amount would be considered when looking at the final costs of the home. If a $300 K home became a $390 K home due to reforming the tax system, then the saler would have to reduce the overall price to come in line with the market.

    BTW, if there were no income taxes, then your pay check is going to be 100% of what you earn…rather than the 50 -60% that you actually end up taking home. This year’s Tax Free Day (which is the estimated day of the year when you finally start earning wage just for you…rather than income taxes) was April 8th. With the Fair Tax, the day become January 1st of each year.

    • John Konop says:

      BF,

      YOU SAID:

      ….If a $300 K home became a $390 K home due to reforming the tax system, then the saler would have to reduce the overall price to come in line with the market…..

      HUH:

      So I get less than 3k off my property taxes but my house drops by 90K in value? Now that is a bad ROI!! And what do you think happens to all the people who are suddenly way upside down on their loans? Oh we already know that story!

      YOU SAID:

      …BTW, if there were no income taxes, then your pay check is going to be 100% of what you earn… …rather than the 50 -60% that you actually end up taking home….

      THE TRUTH:

      50 % of people do not even pay income taxes and for them you will be sending them checks every month. And a company does not have to give you the FICA contribution they could just pocket it or reinvest in their company. This would be a great deal for people in my tax bracket but your math does not box.

      And the collection rate is already difficult for local sales taxes what makes you think adding 30cents on a dollar federal tax will not even create a big collection nightmare?

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