Mike Klein Online

Georgia Tax Reform Collapses as GOP Leadership Withdraws the Bill

Mike Klein

The perceived crown jewel of this year’s General Assembly session collapsed late Monday afternoon when Republican leaders concluded they did not have enough confidence in their financial numbers so they decided they would not bring the bill to a House floor vote.

Speaking late Monday at the state capitol, Georgia House Speaker David Ralston told reporters, “We’re going to call a time out. Tax reform is not dead. Tax reform is delayed.” Ralston has described tax reform as being one of his two biggest priorities this session.

A source who is familiar with Monday’s developments said Republicans might ask Governor Nathan Deal to include tax reform on the agenda when lawmakers return to Atlanta this summer to handle voting district reapportionment. Another option would be to delay all further tax reform consideration until the 2012 General Assembly that starts in January.

House Democratic Minority Leader Stacey Abrams agreed with Ralston’s decision to delay tax reform.  Abrams has consistently questioned the accuracy of numbers being used by the majority party and she has stated tax reform could raise taxes on middle-class Georgians.

A different outcome seemed still possible Monday morning when the special joint committee on revenue structure passed tax reform legislation on a voice vote.  The bill passed after an eight-minute hearing, majority Republicans voting yes and the panel’s few Democrats voting no.

Observers expected that the bill would move quickly to the House floor so that it could pass and reach the Senate before the day ended. Several hours passed without any House action. Then word came that the bill would not move forward.  The 2011 General Assembly ends Thursday.

Tax reform began as a bold initiative one year ago when the Georgia General Assembly created a special council of private sector business leaders and university economists.  Their 50-plus page report was delivered to legislators in January.   It came loaded with ideas but many were almost immediately considered to be politically impossible.

The special council’s work generated few fans.  It proposed reducing personal and corporate income taxes from 6% to 4%.  But it also proposed reinstating the state sales tax on groceries, a new state sales tax on many personal services, and higher taxes on motor fuel and cigarettes.

Two months of difficult discussion and number crunching resulted in a bill that would reduce the state’s 6% maximum personal income tax rate to 4.6% in January 2012 and then 4.55% starting in January 2013.  The bill as it existed Monday would have contained higher itemized deduction limits than originally considered largely in an effort by Republicans to blunt Democratic criticism.

The version approved in committee Monday also included new state sales taxes on automobile repair services and motor vehicles sold between private parties, plus a 7% communications services tax that would replace multiple current taxes.  Two new exemptions were created; state sales tax would no longer be charged on energy used in manufacturing and agriculture.

(Mike Klein is Editor at the Georgia Public Policy Foundation)

April 11, 2011 - Posted by mikekleinonline | Uncategorized | Georgia Public Policy Foundation, Georgia Tax Reform, Mike Klein