Tax Reform Bills Coming To The Forefront In The Legislature

March 1, 2013 8:20 am

by Nathan · 28 comments

Georgia may be on its way to some meaningful tax reform. The first glimmer of hope was in Senator Josh McKoon’s (R-Columbus) SR 8 which would cap the state income tax at 5.5% in 2016 and then reduce it by 0.5% every year until the rate is zero.

Comes now Senate President Pro-Tem David Shafer (R-Duluth) with two bills in hand. Those bills, SR 412 and SR 415, are proposing amendments to the state constitution: to limit the state sales tax rate and provide a proportional reduction of the state income tax in the event the sales tax is increased and to provide a cap on the state income tax rate, respectively.

In an article by Jim Galloway, Senator Shafer indicated that this would draw a path for our state to ween itself off of the income tax:

“This creates a path for us to move from the income tax to the sales tax,” the Senate president pro tem said this afternoon. The income tax currently accounts for about half the state’s tax revenue.
Other uses of the sales tax by local governments would be grandfathered in, but in essence, the state government would be laying primary claim to retail sales as a future funding mechanism.

This is a step in the right direction towards meaningful tax reform in our state. I look forward to see if these amendments wind up on Governor Nathan Deal’s desk and, ultimately, put on the ballot for voters to consider.

Ramblinwreck March 1, 2013 at 9:05 am

These are both good but I’d rather see them take a stand to wean us off handouts from the federal government for all that “free” money.

gcp March 1, 2013 at 11:22 am

McKoon’s bill phases out the income tax but does not offer an alternative. Schafer’s bill limits taxes. Now can we get one of our fine legislators to offer a clean bill that eliminates the income tax and replaces it with a sales tax so we can get an up or down vote? These proposed incremental changes are useless.

gcp March 1, 2013 at 11:33 am

Or if the legislature can’t decide how about a ballot referendum and let the voters decide. It could prove quite interesting.

Charlie March 1, 2013 at 11:41 am

Question for those that are eager to replace income taxes with sales taxes:

Are you ready to accept a mechanism that will tax all online purchases, or are you living in a world where you still feel like you like sales taxes because you think they’re easily avoided?

saltycracker March 1, 2013 at 12:56 pm

Tax all monetary transactions and set fuel tax at 10% at the distributor level and we should be able to end state income taxes and end homesteaded property taxes plus take a severe chunk out of other property/ad valorem taxes.

saltycracker March 1, 2013 at 1:01 pm

Not enough to end all property taxes ? Maybe stop encouraging debt: don’t allow mortgage deductions & tax mortgage payments at some low rate….

James March 1, 2013 at 5:12 pm

I have a similar question, Charlie. Replacing income tax with a statewide sales tax is theoretically revenue neutral. So why does everyone who supports a statewide sales tax believe that they will pay less tax under that scheme?

saltycracker March 1, 2013 at 6:27 pm

Who thinks it is a tax reduction ? For many of us it would be a tax increa
A flat tax would be a tax increase for many savvy or can structure with the tax laws but everyone would have some skin in the game. Those in the middle wouldn’t get the big squeeze.

An overall sense of fairness in a system reduces the manipulation of the system.
A old French or Greek proverb

gcp March 1, 2013 at 11:58 am

Yes to taxing online purchases….The income tax is the easily avoided tax. Criminals, illegals, “self-employed”, nonprofits; how many of them pay a full income tax? Sales tax is much more difficult to avoid. How does one avoid gas sales tax, food sales tax, medicine sales tax? Only if you grow your own food, refine your own oil and compound your own medication.

IndyInjun March 1, 2013 at 8:12 pm

EBT Card.

The GOPers are in love with sales tax. I am so darned tired of their fixation, I actually wish they, forgetting that Georgia borders 5 other states, would try it. The carnage to state and local finance would be breathtaking.

Dream on. It would kill $tens of millions in legal fees for county attorneys doing bond finance deals, arbitrage of county funds by connected banks, gut existing sales tax revenues, and put the hammer on Georgia exempt bonds, both new and existing.

gcp March 2, 2013 at 10:47 am

Strange, but sales tax in lieu of income tax works well in seven states, one of which is Florida. Also works well in Tennessee which does not tax earned income. Even Jindal in La. is talking about moving to a sales tax.

eburke March 1, 2013 at 4:54 pm

We can’t keep giving more exemptions to the Sales Tax each year and ever hope to end income tax or reduce property taxes. Everytime the General Assembly gives a sales tax exemption they indirectly raise local property taxes.

saltycracker March 1, 2013 at 6:28 pm

+1

Dave Bearse March 1, 2013 at 11:07 pm

Similiar to “fee” being Gold Dome code for “tax”, “tax reform” is lobbyist code for “Christmas ornament”.

There had been discussion for what, approaching a half dozen years, on ending the ad valorem tax on motor vehicles? So what’s the excuse for the f— up with respect to taxation, err, the title fee, on leased vehicles?

Answer: Legislators that really don’t know what they’re doing listening to incompetent industry lobbyists while dining at expensive restaurants.

It’s a reason Stacy Abram’s bill requiring tax legislation be proposed in the first session, and voted on in the second, is the best tax bill in the hopper this session—-it allows for thorough fiscal evaluation instead of relying on the BS lobbyists are paid to dish to legislators.

On another note, Georgia’s income tax is already rather flat, so this about the 47% on one hand. On the other it’s much easier for the well-connected to obtain sales tax exemptions than income tax exemptions. It’s a GaGOP win-win. The TEA Party base can take satisfaction at increased taxes on moochers, and the well-connected can buy tax breaks that spread the tax revenue losses to everyone else that isn’t well-connected.

WeymanCWannamakerJr March 2, 2013 at 12:20 am

It gets even better. The Senate version of the do over title tax bill as introduced by, DAH DADA DAH… Sen. Don Balfour, gives a 30% tax break to “buy here, pay here” used car dealerships. They will pay 4.5% vs the 6.5% that new car dealers and individual taxpayers will pay in this version passed by the Senate. I, for one, am appalled that the dealer’s association paid good money out all around last year to get this legislation and now they are having to pay again to get it right. I’m sure they deserve the discount, don’t you?

Will Durant March 2, 2013 at 12:53 am

The Senate version of the do over title tax bill as introduced by, DAH DADA DAH… Sen. Don Balfour, gives a 30% tax break to “buy here, pay here” used car dealerships. They will pay 4.5% vs the 6.5% that new car dealers and individual taxpayers will pay in this version passed by the Senate. I, for one, am appalled that the dealer’s association paid good money out all around last year to get this legislation and now they are having to pay again to get it right. I’m sure they deserve the discount, don’t you?

Dave Bearse March 2, 2013 at 1:43 am

Thanks for informing me of the bill’s sponsor.

Leave it to the Balfour’s extensive first hand experience with state government expenses to know that it cost the 30% less to title buy here pay here vehicles than to title other vehicles, hence a 30% less “fee” is only fair, natch.

I wrote that lobbyists were incompetent. Incompetent perhaps like a fox. What easier way for lobbyists to collect another years fees and fine dining at employer’s expense?

Dave Bearse March 2, 2013 at 11:36 am

And their clients benefit too. The legislation fix is simply another certain opportunity to attempt festoon the tax code with another special interest Christma ornament, as is occuring with HB266.

John Konop March 2, 2013 at 7:07 am

Will,

The issue is more complicated than that….. In the high risk used car business, the default rate is high. The law was that a used car dealer selling high risk deals could pay the taxes on the vehicle as they got the payments. Governor Deal wants all the taxes paid up front, even if the car comes back ie repo…….and when that car gets sold again, it would owe the up front taxes again, even though the dealer may have only gotten a few payments from the last transaction.

The old tax collection method was best in my opinion, because it kept the down payments low, as well payments, via the exposure on the car not having a full tax charge due up front…remember this consumer just got hit hard on the 2 percent increase in FICA. The dealer association was reacting to change in the law not asking for any breaks. Because they saw this woul create a price increase to consumers via the government double dipping on transactions via up front salesperson taxes and or requiring all the money up front. The association would of been happy with the old method over the compromise…..

saltycracker March 2, 2013 at 10:27 am

John,

Respectfully disagree.
We might need to tweak a sloppy consumption tax but annual ad valorem taxes are always bad. Ad V’s involve some government appraiser controlling a value on tangibles and intangibles you own not necessarily based on a monetary exchange. Supporters of taxing deeded (homes) or titled (cars) properties can certainly justify taxing your furniture, your jewelry, your sports eqt., your stocks, bonds and CD’s.

Sidebar, FICA involved a restoration of a reduced insurance payment in a govt program. It is a mandatory program but calling it a tax is about as bad as calling it welfare – employers and employees pay it, the govt very poorly manages it.

saltycracker March 2, 2013 at 11:05 am

P.S. For the fun of it, in Florida I have to fill out an intangible form with onfo that they magically calculate a tax from but there is an easy way to get at the responsible to tax tangibles and intangibles. Use the well regulated insurance industry and require them to submit a 1099-scrwU to make sure we tax your wife’s ring or antiques.
Just don’t pass this on to our local school board.

John Konop March 2, 2013 at 1:28 pm

Salty,

This tax bill is a sales tax……at point of sale on used cars. Think of it this way:

If a used car is sold for 8k if the consumer put $500 dollars down the tax would be at 7 percent $35. And if the payment was $300 a month the tax would $21 a month. The rule change starting March 1 was the state wanted all the money upfront.

Now the state would get $350 upfront verse a $500 down payment. You understand if ths happened the care dealer would have to raise the down payment and or monthly payment to offset risk? My only point is this would only slow down the economy and not increase tax revanue on a macro. Because it would merely shift more tax revanue toward cars, which a person needs for a job,and steals sales fom other consumable products on a macro. Finally the change is creating extra taxes on revanue never received if a deal ends up in repo, once ahpgsin this is is only stealing sales from other parts of the economy……this is an anti job tax…….

saltycracker March 2, 2013 at 5:37 pm

John,

I understand how it works.
I understand the car mentality is how much a month.
When the car is paid for, the tax sunsets.
Annual ad valorem taxes are forever.

saltycracker March 2, 2013 at 5:51 pm

p.s. It’d take too long to debate the risk analysis as most car notes are non-recourse unless it is a high risk, high profit, we finance, used car lot. This bill was driven by auto dealers, to cut direct used car sales, they make more money on thenon-recourse financing kickback too – leasing was an oops…..it adds jobs….

Dave Bearse March 2, 2013 at 11:32 am

There’s high risk in sub-prime mortgages too. Perhaps those mortage transactions should receive a special interest tax break too.

John Konop March 2, 2013 at 1:34 pm

Dave,

In reality they are given an extra fee on any mortgage with less than 20 percent down. You know they forced to buy insurance on the loan? I guarantee you, if car dealers could trade the change on all the tax revenue up front on this transaction for the reduction the dealers would be all over it.

Dave Bearse March 2, 2013 at 6:26 pm

Then let dealers get all over it and actually advocate for a return to ad valorem taxation, except that they aren’t. (BTW, I opposed the change from ad valorem to sales taxation.) We’re seeing that “tax reform” and discussion of low flat taxes are cover for the well-connected obtain special tax treatment.

Washington Republicans in the minority talk big about closing loopholes/limiting deductions to lower rates in a revenue neutral way. Actions speak louder than words. This special interest tax break sailing through a GaGOP Senate is a better indication of what to expect of a GOP Washington majority.

IndyInjun March 2, 2013 at 1:35 pm

They already did. When the mortgages didn’t get transferred to the REMIC’s in the Great Banking/Securitizations Fraud, it created $billions in tax liabilities, but the IRS isn’t investigating or prosecuting.

Who needs lobbyists to make things “legal” when you can have enough political power to be exempted for committing felony offenses?

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