The Georgia Transportation Joint Study Committee recently offered two major new revenue options to make up Georgia’s transportation funding shortfall: an additional 1% sales tax and a state gas tax hike. In order to sell the new sales tax, estimated to raise $1.4 billion annually, the committee originally designated that half of that revenue would be put towards cutting the state income tax. In a last-minute change, however, the recommendation was modified to let the General Assembly decide how to properly split any new sales tax.
This change makes the option much more palatable to Georgia Democrats, who on principle push against movement to more regressive sales taxes from income taxes. The fact that this change was necessary despite massive Republican majorities in the General Assembly confirms that Democrats will have a seat at the transportation table.
Committee Chair Jay Roberts says the General Assembly may decide to “take the other half [of a sales tax hike] and put it to something else.” If one funding source does end up being a sales tax increase, Democrats should insist that this is the case. Georgia could institute a state-level version of the Earned Income Tax Credit (EITC) to boost the after-tax income of working- and middle-class Georgians and counteract the regressive impact of a sales tax hike. Expanding the federal EITC is supported by both Rep. Paul Ryan and President Barack Obama, so a Republican-Democrat compromise on a Georgia EITC is not out of the question. The Georgia Budget and Policy Institute estimates that a state EITC at 10% of the federal level would cost $274 million a year, leaving over $1 billion for transportation and other priority investments such as education and health care.
Some committee options – eliminating the $180 million a year to the general fund from the 4th penny on gas sales taxes and beginning to pay off $3.6 billion in Department of Transportation debt from the general fund – would strain Georgia’s non-transportation budget. Democrats should be cautious. Any compromise should keep in mind that Georgia’s education system is still being underfunded by over $700 million annually, Georgia’s rural hospitals are struggling to remain open, and over half a million Georgians who would be eligible for expanded Medicaid remain uninsured. Options to relieve any new pressure on the general fund should be discussed. For example, eliminating a single loophole that allows itemizing taxpayers to double-count one of their deductions would bring in an estimated $460 million a year.
Transportation investment is incredibly important, and the report makes clear that our state is falling behind our peers. When our legislators are deciding how to raise the $1-1.5 billion annually to maintain our current system or the $2.1-2.9 billion required to actually improve it, Democrats should make sure that other state priorities aren’t crowded out and that tax increases don’t fall primarily on those who can least afford it.