Below is my weekly column for the Courier Herald papers.
One of the most difficult topics that will consume Georgia legislators this year will be a proposal by the “Special Council on Tax Reform and Fairness for Georgians” to revamp Georgia’s tax code. The fact that our state faces an almost $2 Billion budget deficit during this same term – a budget that must be balanced by law – adds a degree of difficulty, and suspicion, to the Council’s efforts.
The goal of the commission is to create a fairer, broader tax base by eliminating certain exemptions while expanding the number of goods and services that are taxed. In exchange for adding taxes to things that are currently not taxed such as items purchased on the internet, private sales of automobiles between individuals, and most controversially, reinstating the state portion of the sales tax on groceries, the council proposes to cut the State’s income tax rate from 6% to 4% over three years.
The biggest opposition thus far has come from Grover Norquist, a man none of us have ever voted for, but who operates as if he has a veto power over tax proposals – because he often does. Norquist’s group, Americans For Tax Reform, has been quite successful in getting elected officials, mostly Republicans, to sign a pledge stating that they will never vote for a tax increase. Republicans facing primary opposition do not want to be labeled as “tax and spenders”, so they generally have used the opportunity for a quick press release certifying their hatred for taxes without much thought.
While it seems like determining what a tax increase is should be easy, it has often proven a bit more confusing. The Council on Tax Reform’s proposal will likely be the biggest test yet of Norquist’s pledge, as there is already significant disagreement on whether or not this is a tax hike.
Most of those whom I have seen criticize this proposal as a tax increase are limiting their analysis to the first year revenues brought in by the state, when the income tax will decrease from 6% to 5%. They do not want to look at the revenue offset during the next two years as income tax revenues continue to fall as rates move to 4%. Thus, they conclude, if the state earns any extra money from taxpayers collectively, then it must be a increase, and therefore must be opposed. I find this method of thinking arbitrarily limited, and frankly, intellectually dishonest.
The Tax Council and those who support their plan would do well to invoke the language used to support the FairTax (a movement to replace the income tax with a national sales tax) as they try to sell this plan to the legislature and ultimately the voters. The goal is to tax those who currently avoid tax, and to broaden the tax base to limit the effects of government taxation on the free market. Thus, if more people are taxed, but each (or most) face a lower tax burden, then it is hard to argue that the individuals and the state are better off.
The goal of the opponents is to cap the amount of money going to government, so as to limit its expansion. I can understand and accept this goal to a degree. But these same folks usually use supply side economic arguments for tax cuts, claiming that income tax cuts will increase tax revenue. Either they don’t really believe income tax cuts grow the economy sufficiently to increase tax revenues, or they believe that additional revenue for the government is OK in some instances, but arbitrarily reject the temporary increase in year one government revenue in this plan based on the need to be against something.
I personally have not had time to analyze the proposal of the council to determine if I support their changes in total, but I have had time to reject the “Government by platitude” nature of Norquist’s tax increase claim. There will be a serious debate over the next four months over this bill, and an adult conversation is required. We must urge our legislators to resist government by sound bite, and instead, vote based on the path that is sound public policy.