Benjamin Franklin said many years ago that nothing is certain in this world except death and taxes. With 1,261 separate taxing entities, the state of Georgia has certainly proved Mr. Franklin to be correct in his assertion.
That’s right — with 159 counties, 180 school districts, 500-plus cities and 422 various and sundry taxing authorities, the state of Georgia has 1,261 separate taxing entities. Mind-boggling, to say the least.
Currently, under the leadership of Speaker Glenn Richardson, the Georgia House of Representatives is studying a proposal to completely eliminate our states property tax and replace it with a statewide sales tax. Called the GREAT (Georgia’s Repeal of Every Ad-valorem Tax) plan for Georgia, the proposal would require a constitutional amendment to be voted on by the citizens in November 2008.
The theory behind the plan is simple — eliminate all property taxes, taxes on land, homes, inventory, vehicles, etc., and replace it with an additional 4 percent statewide sales, use and service tax that is to be collected by the state and returned to local counties, cities and school districts. The plan will also eliminate many sales tax exemptions that special interests have accumulated over the years.
Proponents of the plan point out that the last overhaul of Georgia’s tax system was 70 years ago and our economy has changed significantly since then. During that time, home ownership has increased from 30 percent to 70 percent.
Instead of taxing the ownership of property, proponents say, we should go to a system that taxes the receipt and exchange of money.
After all, when the current property tax system was created we were an agricultural society and people made a living off of their land. Today we are a service-based society and yet we don’t tax services at all.
Under the current system, proponents of the change argue, taxing authorities such as counties and school boards determine how much money they need and then set the millage rate and property values at the number they need to raise the necessary funds. This has led to property taxes increasing faster that personal income. For instance, since 1990, personal income has increased 146 percent while property taxes have increased 176 percent.
Particularly hard hit are those on fixed incomes, who have lived in the same house for many years and yet can no longer afford it because of the increase in property taxes. The same argument can be made for young people who have budgeted for a set mortgage that increases more than they can afford because of increased property taxes.
By switching to a tax system based on a consumption tax rather that a property tax, people will have more control over the amount of taxes they pay.
As is to be expected, taxing authorities such as cities and counties have raised major concerns about the proposal. Losing the ability to control their major source of income could lead to local governments having to cut back on services. Under the current system, they argue, they can reduce levels of service and reduce property taxes or increase level of services and increase property taxes. This assures them of local control. By going to a state-wide sales tax increase, revenues would be fixed for cities and counties without the luxury of being able to tweak a millage rate.
Proponents of the plan point out that local governments will still get to choose how to spend their funds and will have greater control over certain local option sales taxes such as the SPLOST and ELOST. Currently these local option sales taxes are only allowed to be used on capital improvements, such as construction projects. Under the new plan local governments would be allowed to use up to half of these revenues for operations, giving local governments and citizens the ability to choose their taxes.
Arguably, there is much work to be done on the current proposal before it is a finished product.
But one thing is for sure — change is on the way for the way Georgian’s are taxed for the next 70 years.