Tax reform in Georgia?

There has been some talk in the last week or so about the Georgia General Assembly giving tax reform another try this year. The Atlanta Journal-Constitution previews some of the ideas that are on the table:

The tax plan, quietly developed by state leaders, also would cut taxes on manufacturers, a major goal of Gov. Nathan Deal and top legislators eager to jumpstart Georgia’s slow economy.

Full details of the plan haven’t been released, and many legislators involved wouldn’t comment on specifics. But officials with knowledge of the plan, speaking exclusively to The Atlanta Journal-Constitution, described what it might look like.

The proposal, put together by Deal and Republican lawmakers, is expected to go before a special tax committee Monday. The proposal could still change before it is released.
The proposal will include phasing out the sales tax on energy used by manufacturers. Deal has made that a priority in hopes of spurring a manufacturing sector that has struggled for years. Deal said eliminating the tax would make Georgia businesses more competitive.

But the manufacturing tax cut comes with a price tag: about $137 million in annual lost state revenue. So other tax changes had to be made to help pay for it.

Other aspects of the tax reform proposal would include a personal income tax cuts, eliminating the vehicle ad velorum tax, or “birthday tax,” and taxing Internet sales on retailers in the state. In all, both individuals and businesses would see a net tax cut.

Tax reform is long overdue, but we’re now on the 35 day of a 40-day legislative session. While we knew that it could come up again this year, one of the reasons that leaders in the legislature put a hold on the tax reform bill last year was because crafting tax policy with such little time left on the clock was probably not the best idea. So what’s changed?

This is something that, as good as it may wind up being, needs more time on the clock to let legislators and interested constituents look at what they’re proposing instead of trying to arbitrarily push a tax reform measure through at the tail-end of the session. They proposal was altered so frequently last year, after the tax council released its recommendations, that it was hard to keep up with what the final product was going to be.

We shouldn’t dismiss it out of hand, but if the proposal has to be changed frequently due to political pressure from unpopular proposals, such as the online sales tax, and/or a fiscal note is produced with enough time left on the clock, the legislature should wait until next year early on the in session to take it up again.

2 Comments on “Tax reform in Georgia?”

  1. The counties are looking at a $200 million revenue loss if the energy exemption applies to local sales taxes. The sales tax paid to electric and gas utilities on sales tax returns are only a part of the revenue. Coal fired plants pay use tax on the coal that they consume. Some counties probably don’t even understand what will hit them. Fortunately, some folks got on top of this early and exemption will likely only be for the state sales tax. If not, the legislators for the affected communities may be about to gut their sales/use tax revenues.

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