The Campaign to Prevent an Income Tax Rate Increase Starts Now

June 10, 2014 19:22 pm

by Jon Richards · 25 comments

In addition to the high-profile Governor and Senate races in November, Georgia voters will decide on a constitutional amendment that prevents any increase in the state’s income tax rate. That’s the result of Senate Resolution 415, sponsored by President Pro-Tem David Shafer.

Earlier today, 17 Georgia economists chimed in with their endorsement of the measure. From a press release:

“We endorse Sen. David Shafer’s Senate Resolution 415 amending the State Constitution to prevent any increase in the maximum state income tax rate.

“Sen. Shafer’s constitutional amendment gives Georgia a competitive advantage in attracting new jobs and businesses and in persuading existing businesses to expand, as it provides a large and important measure of long-run certainty in Georgia’s business environment.

“We also endorse future tax reforms that would lower Georgia’s income tax rate in order to be more competitive with our neighboring states and reduce the tax burden paid by Georgia’s citizens.”

The list of economists supporting the measure is below the fold.

Dr. Paul H. Rubin, Samuel Candler Dobbs Professor of Economics
Emory University

Dr. Benjamin Scafidi, Professor of Economics
Georgia College & State University

Dr. Dwight R. Lee, Professor Emeritus of Economics
The University of Georgia

Dr. Jeffrey H. Dorfman, Professor of Agricultural and Applied Economics
The University of Georgia

Dr. Donald Ratajczak, Regents Professor Emeritus of Economics
Georgia State University

Dr. E. F. Stephenson, Professor of Economics
Chair of the Department of Economics
Berry College

Dr. Rand W. Ressler, Professor of Economics
Chair of the Department of Finance and Economics
Georgia Southern University

Dr. W. Ken Farr, Chair of the Department of Economics and Finance
Georgia College & State University

Dr. Michael Daniels, Professor of Economics
Columbus State University

Dr. Govind Hariharan, Professor of Economics, Finance and Quantitative Analysis
Kennesaw State University

Dr. Christine P. Ries, Professor of Economics
Georgia Institute of Technology

Dr. Donald Sabbarese, Professor of Economics, Finance and Quantitative Analysis
Director of the Econometric Center
Kennesaw State University

Dr. Tyler T. Yu, Associate Dean of the School of Business
Professor of Economics and Accounting
Georgia Gwinnett College

Dr. David B. Mustard, Josiah Meigs Distinguished Professor of Economics
The University of Georgia

Dr. Bill Yang, Professor of Economics
Georgia Southern University

Dr. Christopher Clark, Associate Professor of Economics
Georgia College & State University

Dr. Brooke Conaway, Assistant Professor of Economics
Georgia College & State University

Titles and institutions are given for identification purposes only. Dr. Rubin and Dr. Lee are past presidents of the Southern Economic Association

{ 25 comments… read them below or add one }

Jackster June 10, 2014 at 7:29 pm

Unless it’s an effective tax rate, inclusive of all the ways gov’t can get around not raising the income tax, I don’t see how this is useful.

The Last Democrat in Georgia June 10, 2014 at 7:48 pm

You probably don’t see how this is useful because it’s not useful.

It’s a big political ‘dog-and-pony show’ designed to distract voters from the fact that state government is not phasing-out and eliminating the state income tax anytime soon (if ever) because it does not want to give up the revenue that the state income tax brings in.

No non-liberal politician was ever threatening to raise the state income tax above the current rate of 6% if only because they know that advocating for such a tax increase would be suicide to one’s political career in Georgia.

MattMD June 10, 2014 at 10:11 pm

So what if we’re not going to eliminate the state income tax? Of course the state isn’t eager to give it up, we need tax revenue to run a government.

I have never heard any serious alternatives to the state income tax. We don’t have the oil revenues of TX, neither the tourism of FL and Tennessee is a backwater.

This is a dumb amendment though, it sounds like something California would do back when they voted on tax policy.

The Last Democrat in Georgia June 11, 2014 at 12:12 am

State government does not necessarily need as much tax revenue as one might think.

Many state government services can be outsourced, sold-off and run much more effectively as privatized functions, including the Georgia Department of Transportation, the State Road and Tollway Authority, the Georgia Regional Transportation Authority, the Georgia Ports Authority, the Department of Driver Services, the Georgia Department of Revenue, the Georgia World Congress Center Authority, the Georgia Department of Natural Resources, etc, etc, etc…

Georgia’s state government just absolutely refuses to voluntarily shrink itself and collect less tax revenue like it should.

George Chidi June 11, 2014 at 4:47 am

Georgia’s state revenue per capita is the lowest in the United States. 50 out of 50.

Not coincidentally, we have some of the worst education results in America, some of the worst health results in America, among the widest disparities in income and wealth in America, and less economic mobility — those bootstraps we keep hearing about — than anyone else in America.

And you want to shrink government more. Because, plainly, that’s working well for most people.

The Last Democrat in Georgia June 11, 2014 at 6:36 am

It doesn’t matter how low Georgia’s state revenue per capita is….Because no matter how low a state’s revenue per capita is from tax collections, it can always be lower. Taxpayers can never have too much of their income returned to them from government.

And I don’t just want to shrink government. I want government to work with maximum efficiency at the lowest possible cost to the taxpaying public.

…And the best way to make government work with maximum efficiency at the lowest possible cost is to shrink government by outsourcing, selling-off and privatizing all but the absolute most essential functions.

George Chidi June 11, 2014 at 11:28 am

We have a philosophical difference of opinion, particularly about what constitutes “efficiency” and how outsourcing impacts that. Misaligned incentives. asymmetrical information imbalances, client-agent issues, tragedy-of-the-commons problems … you can’t outsource everything. It doesn’t work. It’s never worked. That’s why basically no one does it that way and those who have generally ditch the idea when they see the results.

Fortunately almost no one buys this line.

The Last Democrat in Georgia June 11, 2014 at 1:47 pm

Mr. Chidi, you make an excellent point that we cannot outsource EVERY government function. But there are many government functions that we can outsource, sell-off and privatize at an actual profit to the taxpayer in terms of both additional money in the taxpayers’ pockets and the vastly increased delivery of government services to the taxpaying public.

State government has entirely too many non-performing assets and liabilities sitting around costing the taxpayers entirely too much. We need to liquidate many of those non-performing assets and liabilities and turn them into performing assets by eliminating them as taxpayer-funded public expenditures and turning as many of them as possible into cash for taxpayers.

It’s not that “no one buys this line”. The problem is that our government is not selling enough of this line to the benefit of the taxpaying public.

George Chidi June 11, 2014 at 2:29 pm

I might suggest that there are other functions that operate better in-house. A privatized DNR, for one, would almost certainly result in the destruction of public property for private gain, the tragedy of the commons issue.

The department of revenue? Really? Tax collection is pretty core to governance, and the client-agent issues involved are staggering. (Sure, governor, we collected all the money we said we did, and not a penny more. Yes the estimates of taxable income we provided by contract were spot on. Oy.)

With one breath, I hear a call for strict licensing that bars illegal immigrants from getting secure-document drivers licenses and for all voters to carry ID … and with the next breath, a conservative call to privatize the agency that issues them. Because what could possibly go wrong there?

Unless you believe that the public road system should devolve into a system of toll roads unlike anything in the modern world, there’s no getting rid of the DoT. I’ll hear arguments for consolidating other transportation agencies under one roof.

On and on.

Performance matters. It’s a metric of efficiency. We’ve cut to the bone, and we’re getting craptastic performance. Other states spend more, and get better results. You want even crappier results, stay on this path.

The Last Democrat in Georgia June 11, 2014 at 3:26 pm

In the case of a privatized DNR, only select functions would be privatized but public property could not be destroyed for private gain. Any privatization of a public agency such as DNR does not mean public lands would have to be opened up for private exploitation.

In the case of a privatized DoR, there are many private firms that could do a better job of collecting revenue than the government at a much-lower cost to the taxpayer than the government.

In the case of a privatized DDS, the private entity or entities does exactly what the government tells it do when executing government functions, otherwise the private entity or entities loses the right to execute government functions according to the terms of its contract with the public.

In the case of a privatized GDOT…Our main economic competitor/partner China has an Interstate road system that is almost completely tolled and privatized. There are also multiple tolled and privatized Interstate highway segments in the U.S. (including the I-90 Chicago Skyway, the I-80/I-90 Indiana Toll Road and the Dulles Toll Road in Virginia) with many more surely to come as the Interstate highway trust fund is slated to become insolvent later this year and as the fiscally-challenged Feds look to unload all federal transportation costs off onto the states.

Dave Bearse June 11, 2014 at 10:15 pm

Sure, governor, we collected all the money we said we did, and not a penny more.

And from all the right people too!

MattMD June 11, 2014 at 9:08 pm

You post like an insane reactionary.

How is privatizing so much more efficient? It’s not like businesses out there fail, right? I agree that GDOT corrupt, probably on the level of The Sopranos but who do you think will be running this new private empire? It’s going to be some of the same characters.

Do you think we should just go and “privatize” the USG system?

I don’t really complain about my state tax burden because I live in a well-run county and even I make a hell of a lot more than most people. I just don’t get this mindless baying about how we are so overtaxed in Georgia.

The Last Democrat in Georgia June 12, 2014 at 3:09 am

Privatization is so much more efficient because it shifts much of the cost of providing government services onto the private sector which collectively is much-larger and has many more financial resources than the public sector.

Privatization could especially help a traditionally-troubled government agency like GDOT by shifting all of the cost of maintaining superhighways and super-arterial major surface roads off onto the private sector and eliminating those costs for the taxpayers.

For the most part, the University System of Georgia should remain publicly- funded and operated, but there are many functions of the USG that could be privatized, particularly in the state’s Community College and Technical School system where most students prepare for careers with private employers.

Ellynn June 11, 2014 at 10:24 am

As long as US military cargo ships enter the port of Savannah, The GPA will not be privatized – could not run the risk of a non-domestic company buying out a US firm and then running the port.

The Last Democrat in Georgia June 11, 2014 at 2:51 pm

Non-domestic international corporations already successfully term-lease and operate privatized public infrastructure assets all over the U.S. to varying degrees.

A privatized Georgia Ports Authority would be no different from other successful privatized public infrastructure models around the U.S. and the world. A privatized operating model would also most likely help the GPA to be even much more financially successful than it already is as a wholly publicly-owned (but cash-limited) entity.

greencracker June 10, 2014 at 10:50 pm

Nice of the Regents-employed profs to sign this letter.

Harry June 11, 2014 at 12:52 am

Wonder if they would sign a letter to drop the rate by 1% per year over the next 6 years?

The Last Democrat in Georgia June 11, 2014 at 1:06 am

Probably not because this all a smokescreen (poorly) designed to distract the public away from the fact that they’re never going to eliminate or even reduce Georgia’s state income tax.

gcp June 11, 2014 at 11:26 am

Agree this amendment is useless but I am curious if anyone knows the results of question 2 on the May Republican primary ballot which asked voters if they wanted to eliminate the state income tax and replace it with a sales tax.

MattMD June 11, 2014 at 9:15 pm

I think the “Fair Tax” crowd signed off on it, the majority of us who are sane, did not.

gcp June 11, 2014 at 10:28 pm

The question must have only been on the Gwinnett Repub ballot.

MattMD June 11, 2014 at 9:16 pm

How is privatization going to replace that revenue? Do you even have some study or are you just pulling this out of your rear?

The Last Democrat in Georgia June 12, 2014 at 3:25 am

With privatization the revenue from the state income tax won’t be needed because the public will no longer be paying many of the costs of providing government services that the revenue from the state income tax currently funds.

If the public expenditures that the state income tax funds goes away, the state income tax should also go away.

saltycracker June 11, 2014 at 12:53 pm

They could lower income tax by closing loopholes like deductions for debt and maybe end income tax and lower the overall rate by filling big potholes on sales taxes…..like collecting sales taxes on internet sales.
What we pay on line for something is being more of a factor of our zip code in the computer world.

Then there is the need for a complete overhaul and simplification of the code resulting in an administrative reduction.

saltycracker June 11, 2014 at 1:05 pm

Correction: They could lower the income tax rate