On Jan. 7, the Special Council on Tax Reform and Fairness submitted its much-anticipated report to the lieutenant governor and Speaker of the House.
Created during last year’s legislative session by HB 1045, the council was charged with the responsibility of conducting a study of the state’s current revenue structure and making recommendations for improvement.
The council set out to create a tax system that is more stable during changing economic times and brings Georgia’s antiquated tax system into the 21st century.
Some highlights of the recommendations of the report are:
Income tax
• Decrease personal and corporation income tax rate from 6 percent to 4 percent by 2014.
• Repeal retirement income exclusion set to start phasing out in 2012.
• Eliminate all itemized and standard deductions and personal exemptions except for dependents ($2,000)
• Sunset all personal income tax credits except for taxes paid in other states; federally funded energy and water efficient products, and angel investor credits.
• Sunset corporate income tax credits including Film and Low Income Housing and most others by 2014.
• Eliminate all economic development credits by 2012.
Sales tax
• Eliminate existing sales tax exemption for groceries by June 30, 2011 (food stamps and WIC exemptions remain).
• Retain government, business/agricultural/manufacturing exemptions.
• Sunset exemptions for government authorities, health care, education, nonprofit by June 30, 2014.
• No more sales tax holidays.
• Impose sales tax on casual personal property transactions (automobiles/boats/airplanes).
• Expand sales tax to certain personal and household services including clothing and shoe repair/alteration and dry cleaning, household utilities of trash, water and septic, housekeepers, lawn care, appliance repair, home security fees, vet and pet services, haircuts and styling, photography, golf courses, gyms, dating services, credit card membership fees, car repair, tires, and other auto services.
• Repeal current sales tax of franchise fees for video and telecommunications and replace with 7 percent excise tax on all communications services (except Internet service, which is prohibited by federal law)
Miscellaneous
• Raise cigarette tax from $.37 to $.68 per pack
• Revise motor fuel tax to cents per gallon rather than indexed to average price to gallon
• Reduce insurance premium tax to 1.75 percent
• Establish a tax court independent of the Department of Revenue (DOR)
• Review DOR organization
• Review Georgia’s tax structure upon every gubernatorial election
• Further study local property taxation
• Allow ESPLOST funds to be used for maintenance and operation (M&O) if capital projects are complete and fully funded.
• Preserve AAA bond rating.
As expected, reviews of the report have been mixed. Some lobbying groups have criticized the plan as tough on working families and low-income senior citizens. Others, such as anti-tax groups, have said that the plan is really just a tax hike in disguise.
The report will now go to the 12-member Special Joint committee on Georgia Revenue Structure (SJC) consisting of leaders in the House and Senate who will be responsible for writing a bill to be presented to the General Assembly.
If considered, the legislation will be introduced in the House — as is required by our state constitution for all revenue bills — and will receive an up-or-down vote without any amendments. The legislation will be required to be read by each chamber three times on three separate days.
There is, of course, the possibility that the report will not be taken up at all since it has to be adopted in its entirety. A real possibility is that pieces of the report will be introduced as legislation alone for passage.
For most of us, citizens and legislators alike, we see things in the report that we like and others that are distasteful. It is important that we remember the report was written to be taken as a whole and not in pieces.
Moving to a consumption-based tax structure that enhances the state’s economic competitiveness and streamlines Georgian’s taxes will not be easy. As we progress through this historical exercise, let us all be mindful of the three words in our state seal — Wisdom, Justice and Moderation.
