One Day For All The Marbles; Social Conservatives Are The Newest Obstacle For Tax Reform

March 29, 2011 23:16 pm

by Charlie · 16 comments

Been trading emails and texts with capitol gnomes most of the afternoon, while I’m in DC for an official meeting of the military industrial complex.  Given that I still have a column to write for tomorrow, I’ll try to keep this one brief.  Or not.

The vote on the tax reform proposal, should it happen, will come in the House tomorrow.  Details on the actual proposal are here, with a few comments by Jim Galloway here.

A bit of background:  Because this bill was the product of a joint House-Senate committee/special commission, it is not bound by the “crossover day” rule.  Thus, it can appear as a standalone bill this late in the session, and still pass both houses.  Yet, there are just two extra days margin of error if it is not passed by the House tomorrow in order for the Senate to take action (barring the bill being substituted for or amended to other legislation).

But time may be working against this bill more than just according to the calendar.

The bill is just now beginning to be understood.  The original focus was on revenue neutrality versus a tax hike, but unelected arbitor of fact Grover Norquist has reissued testicles to Republicans who signed his pledge and allowed them to vote for the bill if they so choose.

Democrats have now begun their normal battle plan of class warfare, despite all evidence to the contrary that the Georgia electorate tends to not only ignore these arguments, but marshall agaisnt them.

The fly in the Republican ointment, however, is social conservatives.

The Christian Coalition has taken it up the shorts on Sunday Sales.  Georgia Right to Life has not recovered from Barry Loudermilk’s bait and switch of his fetal pain bill for one to close all abortion clinics, and Speaker Ralston, an attorney, seems to be non-plussed by pro-trial lawyer SB 210 which would allow for wrongful death lawsuits in some abortion cases.  Remember that SB-210 went through the Senate Rules Committee as the Committee of jurisdiction, with no attorney on the committee present for the bill’s hearing.

And so, with no apparent victory for Social Conservatives at hand, this tax reform bill may have stumbled in as an answered prayer.  Late evening whip counts have it too close to call, especially in the Senate, with legislators still not sure if it’s good tax policy.  But it may not matter if emails like those I’ve been getting today take hold.

The key point that could sway nervous lawmakers is the limitation on deductions.  Specifically, charitable (read: church) deductions would no longer be deductable under the revised proposal.  If lawmakers were scared off the original proposal by calls from girl scouts, just wait until a the Southern Baptist Convention starts distributing their email addresses and phone numbers.  Worse for lawmakers, the bill will reduce the standard deduction for dependants from $3,000 per child to $2,000.  The “pro-family” party has just opened up themselves to charges of being anti-child.

As I discussed earlier this week, changing the status quo is never easy.  Because this bill has been negotiated behind closed doors and is now being rushed through in final days of the session, I still will not offer an opinion if it is good or bad policy.  I frankly don’t know.

But I will offer the opinion that a bill that was already 50-50 on passage that eliminates deductions for church tithes and children will be viewed bad politics by many Republicans.  With Democrats solidly against this bill, I do not expect it will pass.

Howard Roark March 30, 2011 at 6:51 am

This is a tax increase on my family.

I will actively work against anyone who votes yes on this bill.

Casual sales of cars taxed, having your car repaired taxed, adding additional taxes to your cell and satellite bill taxed.

Finally, uncovered by one of the interns at the political vine.

PV Uncovers A Special “Nugget” In HB 387-Committee Substitute: You guys do remember what Rep. Larry O’Neal did a few years ago, right? He wrote one big bill that was designed to help only one person: Then-Governor Sonny Perdue. Perdue got a $100,000 tax deferment…for-, what now appears to be, -ever.

Buried deep in the bowels of this new bill is yet another “special deal” for what looks like former Governor Perdue (and maybe a few other “special” friends like Alec Poitivent, et al.). On Page 34, at the very bottom, there are these two paragraphs:

“(a ) An individual conducting business as a grain dealer, commercial feed dealer, and grain warehouseman shall pay an annual license fee in an amount not less than $1,500.00 nor more than $3,000.00. Any fees collected pursuant to this Code section shall be retained pursuant to the provisions of Code Section 45-12-92.1.

(b) A qualified agriculture producer, as defined in Code Section 48-8-3.2, shall pay an annual license fee in an amount not less than $15.00 nor more than $25.00 but in no event shall the total amount of the proceeds from such fees exceed the cost of administering the program under Code Section 48-8-3.3. Any fees collected pursuant to this Code section shall be retained pursuant to the provisions of Code Section 45-12-92.1.”

WOW. Pay an annual license fee of something between fifteen dollars and twenty-five dollars. Gosh. Farmers Sonny and Alec had better start saving-up their dollars they earn from selling corn for the shooting deer-over-bait law’s passage so they’ll have enough to pay the MASSIVE amount of license fee of no more than $25.00 for their “qualified agriculture businesses.”

IF enough arms are twisted, it is going to be most of the suburban and maybe even some of the rural legislators who get tossed-out of office next cycle. Because, no matter what you will claim…no matter how much “incumbent protection” Speaker Ralston and the Senate President Pro Tem Tommie Williams promises you legislators who vote for this bill…it will be the easiest direct-mail to write that you voted for a tax increase when you vote to add sales taxes on phone services and auto repair services.

And, while that actually may be a good way to get some turnover in the House and Senate…it won’t change the fact that you just succeeded in screwing over your constituents. You can look forward to, not only losing a reelection, but being ostracized in your own districts after you lose. Not a very fun way to proceed for the rest of your life, is it?

AND…while Rep Allen Peake (who drinks the House Leadership Kool-Aid every single morning) likes to talk about this being a “jobs stimulus bill,” if one were to look real carefully around Mr. Peake’s head, you can see a lot of horseflies buzzing around him. That’s because he’s basically full of sh*t when he makes those kinds of statements.

PV Summarizes The Feelings Of Just About Everyone Except Larry, Sonny, Allen Peake & Tommie Williams: Ummm…what is the purpose of this bill exactly? Why do we need to rush this through so quickly, without giving legislators a chance to absorb it….take surveys in their own districts to see what their constitutents might want?…Why are you folks acting exactly like the Democrats and President Obama when Obama wrote a bill and shoved it through just because he could?

Calypso March 30, 2011 at 7:30 am

@ Howard Roark

AMEN! I couldn’t have said it better myself. I’ve already sent off two missives to my state legislators and urge others to do likewise.

Trevor Southerland March 30, 2011 at 7:50 am

I don’t think that Democrats began the battle on class warfare, seems to me that this bill (and the tax philosophy behind it) is what began the battle of class warfare.

This is a tax hike on the majority of Georgians, and it’s bad policy.

Bloodhound March 30, 2011 at 8:04 am

Howard, I was headed here to say the same thing!

This “plan” is a travesty and our Party should be able to develop a plan that is not full of questionable sections aimed at obvious political paybacks.

SOGTP March 30, 2011 at 8:49 am

Dear Honorable Representatives and Senators of the Georgia General Assembly,

HB 387 is the legislation to re structure Georgia’s tax code and I recognize that the Bill was required by law to include all the recommendations of the Tax Council. HB 387 needs work. The Tax Council made the following statements on page 10 Concurrence, of its Final Report for Tax Reform and Fairness for Georgians.

“Economists generally agree that economic growth and development is best served by a tax system that;”

It then lists six (6) theories which represent ideas espoused over the years by Economists. Look at the attached chart for more information. The Chart outlines those six (6) theories and compares and contrasts those theories with five (5) known economic ideas in general understanding around the world. The items highlighted yellow are exactly how HB 387 relates to those theories and you can track the level of tinkering at the graph on the top – RED high tinkering; Blue low tinkering. I rate the current Tax Reform plan as moderate tinkering according to the New Keynesian economic theories represented by Alan Blinder, PhD of Princeton University. If there is no entry I could not find a principal for the Committee’s comments.

The size of Georgia’s economy can’t be legislated through a tax code that rewards some and punishes others. Top down centralized planning of an economy DOES NOT work. The State of Georgia can effectively promote a healthy economic environment, but the only way to create wealth and jobs is to rely on individuals that make those billions of decisions each day.

The six (6) points combined;

1. “Creates as few distortions in economic decision making as possible.”

COMMENT: This is simply not the case. This plan will cause distortions, because it is simply impossible for the legislature to create jobs or control the economy of Georgia using a tinkering approach to taxes, exemptions, subsidies, and tax credits. It will create massive distortions and re distribution of wealth, cause malinvestment, and distort the FREE marketplace precisely while attempting to help.

2. “Promotes equity through transfers, subsidies, and tax credits … ” and “Few exemptions and special provisions”

The most problematic piece of this legislation.

COMMENT: The transfers of wealth through subsidies, exemptions, and tax credits do nothing more than take capital from productive people and enterprises to re distribute to favored enterprises. This causes malinvestment and distortions in the market, because those industries that do not deserve to survive will be propped up by value creating industries paying the tab. Those value creating industries will have less capital in which to expand and create real jobs and their wealth will be wasted by weaker propped up enterprises. Let all industries play on the same field and if they can’t survive, let that wealth and capital flow into those industries that are strong and vibrant. Let the wealth and capital be re directed into new enterprises that will succeed, prosper, grow and provide jobs.

3. “Keep taxes low” and “Taxes consumption rather than income …”

COMMENT: Low taxes are good. Whether a consumption or flat income tax is better is up for debate, because the total level of taxation is key. If the state pulls $14B from the economy with a combined flat income tax and consumption tax, it is little different if $14B was taken from a flat income tax or $14B in consumption taxes. The only difference is that FREE markets will determine the products and services most desired by the consumer with a consumption tax and there would have been economic activity rather than an income tax that destroys wealth. If I had to choose I would select the consumption tax and fix the percentage to reduce the amount of wealth and savings taken from the economy by that tax. In the end those products and services most desired by the consumer will be purchased at increasing rates bringing in more revenue to the state.

4. “Taxes consumption rather than income in order to encourage saving and investment.”

COMMENT: Taxing consumption does not encourage saving and investment. As mentioned above the total level of taxation influences savings and investment. The more wealth (profit) a consumer or business can realize, the more savings and investment rises. In a business the level of profitability determines the level of savings and investment. The same with the consumer. The more money left-over (profit) at the end of the month from a paycheck is the money that is available to be saved or invested. The more wealth/capital/savings a person realizes, the more apt they will be to save and invest.

5. “Keeps tax rates low since taxes reduce the quantity on the level of activity of the thing that is taxed.”

COMMENT: The additional taxes on services are particularly harmful to people trying to start their own business and become entrepreneurs. Those small businesses taxed at a higher rate are small businesses. These businesses are generally owned by small entrepreneurs with a special set of skills and limited capital to get started. If you increase the taxes consumers must pay to utilize these services these businesses will suffer. That is not good, because the true driver of job creation are these small businesses. The true driver of increased business activity is small entrepreneurs entering the markets.

The answer to the problem you are trying to solve is simple.

Cut corporate income tax rates, but do not offer a Negative Income Tax in the form of subsidies, tax credits, and exemptions. Make these companies play in a FREE market and if they fail, re direct that capital into the winners that can play in the FREE markets. This will create jobs – quickly I might add.

Cut consumer tax rates (flat income tax and consumption taxes). If you want to energize consumer activity and increase savings and investment, you must give consumers a larger piece of their paycheck at the end of the month after buying a basket of goods. This excess wealth and capital can be used to consume and or save via investment in mutual funds, real estate, or other forms of capital.

Cut spending. Government spending takes wealth and capital out of the system, because it requires consumers to pay on the debt and/or feed the welfare state. This is capital unavailable for savings and investment, consumer activity, and generally investing in the things that create jobs.

Hopefully this will help you to make a decision when casting your vote.

Ed March 30, 2011 at 9:44 am

TL;DR

Now as someone who would have their taxes go up and my purchasing power greatly diminished I will say this: money has to come from somewhere.

Kind of sucks but we’ve got to do something.

bowersville March 30, 2011 at 9:56 am

Then let everyone pay their fair share. Why pick winners and losers?

Ed March 30, 2011 at 10:20 am

I’m in favor of that. As I said, I’m going to be paying more in taxes. I’m not cool with it, but I understand.

Bucky Plyler March 30, 2011 at 10:23 am

Charlie, your opinion about the bill is accurate I think. Your comments about social conservatives, the Christian Coalition, & GRTL taking it on the chops are at least interesting. Remember that it ain’t over until the fat lady sings, and according to us Bible thumpers.. it really ain’t over until the trump of God sounds. The so-cons I know are also extremely interested in taxes, spending cuts, budgets, public policy, business, insurance, etc. We believe that Bible speaks to all these issues and that we have a moral responsibility to engage in them.

Personally, I’m for changing our state tax system to consumption based. Furthermore, I think it would be a great idea to eliminate state income taxes in GA. (realizing that it’s a process of steps) Those states that have done so are doing great. I am not convinced that all of the measures in this proposed legislation will do that will move us that direction, and I certainly advocate that ALL citizens as well as the Georgia Baptist Convention (which is part of the SBC) and ANY religious organization in GA. should actively work against any provision that excludes charitable tax deductions for religious organizations.

Did any lawyers come before a committee for this legislation & make the case for excluding these deductions? Nope..at least the pro-life legislation you mentioned earlier started with testimony in other bills in previous committees.

I can hear it now…in our expert legal opinion… the elimination of church deductions is pivotal to transitioning our tax code toward being consumption based. The Speaker has gone on record by saying that this bill is the best chance of moving that direction if Republicans are really interested in the issue. Reckon why this idea has been included in the bill ???? Just for purposes of debate ?

Howard, I appreciate your comments. Maybe we should now be called mo-cons.

B Balz March 30, 2011 at 1:36 pm

Not to be prickly, neighbor, but in my thinking the many organized, funded, and strong political efforts pushed by any church breaches the boundary of being a non-taxable entity.

Perhaps the ‘workaround’ is the SBC, GRTL, CC can make pol statements on behalf of churches, by denomination, but those entities are probable not taxed much if any.

Tremendous political power to a lobby that is supported by an untaxed base. I’m just sayin’….

Bucky Plyler March 30, 2011 at 2:19 pm

The taxpayers that make up those organizations should never agree to being viewed as a breach, Mr. Unprickly Neighbor. The state never has given us the rights that we enjoy nor is it in the power of the state to do so…that’s some other country !

B Balz March 30, 2011 at 4:13 pm

So my company, composed of taxpayers ought to be non-taxable. I like it!

Clone Of B. Plyler March 30, 2011 at 10:35 pm

Go for it !

debbie0040 March 30, 2011 at 10:47 am
Charlie March 30, 2011 at 1:08 pm

Well, that didn’t take long:

http://blogs.ajc.com/political-insider-jim-galloway/2011/03/30/georgia-baptist-convention-urging-%e2%80%98no%e2%80%99-vote-on-tax-overhaul/

Georgia Baptist Convention urging ‘no’ vote on tax overhaul

The legislators may be willing to take their chances crossing Debbie Dooley, Erick Erickson, and the Democratic caucus. Show me how many are willing to cross the Georgia Baptist Convention. I’m guessing, “not many”.

SOGTP March 30, 2011 at 3:52 pm

LOLs

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