Yesterday, the Special Council on Tax Reform and Fairness for Georgians released its recommendations on how to broaden the state’s sales tax base by proposing a host of new taxes on services and reforming or increasing some existing taxes along with reducing over time the personal and corporate income tax.
I’ve been reading through the recommendations, and it’s hard to see how this isn’t a massive tax hike. I realize that members of the council are saying that it is “largely revenue-neutral,” but when you add up the numbers provided in the report, it doesn’t come out that way.
Most economists tend to agree that a broad sales tax base is good tax policy, so we shouldn’t reject that idea out of hand provided there are corresponding tax cuts that make up for increases in other areas. And in these recommendations, pretty much every good or service provided will be taxed, whether it’s buying a song off iTunes, a book off of Amazon, buying a used car from a neighbor or getting a haircut.
The tax council does propose reducing personal income taxes from 6% to 4% by 2014, also simplifying or eliminating many deductions. They estimate a revenue loss of $650 million in FY 2012 as a result of this cut. Unfortunately, that is the only figure they provided in the report. They didn’t provide the impact of the half-percent reductions in FY 2013 or FY 2014. The reduction in the corporate income tax, which will mirror the personal income tax rates will cut taxes by $100 million.
The council does acknowledge higher tax estimates than they included in their report. For example, they are expecting $472 million in new revenues from eliminating the grocery tax exemption. However, the Georgia Public Policy Foundation believes this would be a $649 million tax hike. Similarly, on taxing person-to-person causal sales of titled personal property – car, boats and airplanes – the tax council expects revenues of $151 million, but they recognize a higher estimate from the Georgia Independent Association of Automobile Dealers of $290 million.
Here are the hard numbers (in millions) from the report. Get ready for sticker shock (and remember; depending on who has the more accurate revenue estimates, this could actually be higher).
| Council’s Recommendation | Revenue Estimate | Personal Income Tax Cut | -650 | Corporate Income Tax Cut | -100 | Eliminating Seniors Income Tax Exemption | 272 | Eliminating Grocery Sales Tax Exemption | 472 | Increasing Cigarette Tax | 120 | Ending Sales Tax Holiday | 36 | Taxing Causal Sales | 151 | Taxing Personal Services | 247 | Taxing eCommerce | 410 | Enhance Communications Tax | 166 | Estimated Tax Revenues | 1,124 |
C/P: Peach Pundit
It’s going to be the largest tax hike in Georgia state history…and that’s what everyone on the right should bill it as.
Think about it: with the grocery tax being implemented, everyone out of work and are going to be hit with $4 on every $100 they spend to feed their families. That’s insane.
It’s always “more, more, more” for them, never, “less, less, less.”
This is a tax increase commission. Period. The Republicans need to have this tax increase strung around their necks in the Republican primaries next year.