Tax Reform In Georgia.

During the last Legislative session earlier this year, the legislature passed HB 1405 which created the Special Council on Tax Reform and Fairness for Georgians. The Special Council will:

“conduct a thorough study of the state’s current revenue structure and make a report of its findings and recommendations for legislation to the Speaker of the House and the Lieutenant Governor no later than January 10, 2011.”

The proposals will be submitted as a bill which the Legislature will receive an up or down vote during the 2011 legislative session.

Meetings are being held across the State as the Special Council works toward making it’s recommendations to the Legislature. I’ve attended two of these meetings and will be attending more. I urge you to attend some of these meetings as you have the time. The meeting schedule can be found here and here.

At the most recent meeting last week at Mercer University in Atlanta, several presentations were given. Kelly McCutchen of the Georgia Public Policy Foundation and Alan Essig of the Georgia Budget and Policy Institute made their proposals (here and here) for reforming Georgia’s tax system.

I also found the presentation by Matt Gardner of the Institute on Taxation and Economic Policy interesting. Gardner gave and overview of what other States have done in recent years on the tax reform front. Things have been tried, some have worked and some have not. Many States seem to be taxing more things, and removing tax exemptions (or loopholes).

Taxing more services for example, has come under consideration in other States. Currently Georgia only taxes 36 services. Florida and Tennessee tax more services but neither State has an income tax. Taxing internet purchases is being tried in some places but Congress will probably have to act if a nationwide system is to be effective. A couple of States have stopped taxing corporate income and are attempting to tax gross receipts. The jury is still out as to the effectiveness of taxes gross receipts.

The members of the Special Council are being careful not to indicate which way they may be leaning (if indeed they are leaning any way at all). They have a tall task in front of them but they seem to be well on the way to proposing a complete overhaul of Georgia’s tax system.

What type of tax system would you like to see in Georgia?

7 comments

  1. Jeremy Jones says:

    “tax gross receipts. The jury is still out as to the effectiveness of taxes gross receipts.”

    No matter what system is developed, a segment of the population will believe it to be unfair. I am not passing judgment on whether the gross receipts is or is not the proper thing, I will allow myself time to read the studies and results. But, I do understand one major objection to it, pass through costs.

    There are some elements of a business where the company does not make a profit and instead passes the direct cost to their customer as a convenience. At a company I once worked, the city imposed a gross revenue tax on corporations within the city limits. At the time of my departure, the company was seriously considering leaving that city because of that one aspect. Their business was direct mail. The pass through was the postage. On a one million mail drop the company was paying about $250,000 in postage. Therefore, my company was paying an income tax on that $250,000. As with anything, the obvious option is to raise your rates to compensate for it. However, industries such as direct mail can be done anywhere in the country, therefore, competition is pretty stiff.

    Like I said, I am not using the above example as the reason we should not go to such a system, I prefer to study actual data, not anecdotal evidence. However, I would be surprised if a gross receipts tax gives Georgia a major competitive advantage, especially in the marketplace that rarely recognizes borders for customers.

  2. BoogDoc7 says:

    A simplified across-the-board tax system. The less time individuals and companies have to work on their taxes, the more time they can spend being productive.

  3. For the most part, I like Kelly’s proposal. I’d like to see a few modifications to it but also have some questions though.

    1. No mention of the corporate income tax? This gets passed on to consumers anyways. I’d like to see it eliminated (possibly over a 3 to 5 year period) and replaced by a consumption tax.

    2. I’m also not a fan of a flat 3% income tax. I’d rather see the income tax percentage lowered over a 3 to 5 year period as the sales tax base and percentage increases until it has been eliminated.

    3. I didn’t see anything that addresses spending in her proposal, though I’m not sure if that’s within the scope of their assignment or not. I did see in one of the other links the mention that another state is considering shutting down rest stops, which brings me to wonder if we’ve considered something along the same lines.

    Canada has rest areas as well that have a fueling station and fast food restaurants. They’re basically privately run enterprises like you’d see on any other exit – except that there’s no access to local roads. Perhaps the state of Georgia should look at selling it’s rest areas to Pilot or TravelCenters of America or whoever the highest bidder is. It’s a one time income for the sale of the land and rids the state of having to maintain the facilities. Whoever buys it could put in fuel pumps and food service. This would add jobs to the local economy and lower the state’s costs of administration and maintenance. Highway rest areas should not be a function of government when an easily implemented private option is available.

    • analogkid says:

      The rest areas on I-95 in Virginia (I believe – It’s been a while) are rad. They’re located in the middle of the expressway, so they only need one rest stop for both northbound and southbound traffic. There are multiple gas stations and restaurants in each one. I assume the property is still owned by the state, though, and that the gas stations and restaurants are leased to different companies. Either way, they are always hopping with people.

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