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House Sends Tax Reform Bill to Senate on 155 – 9 Victory Lap

Mike Klein

The Georgia House overwhelmingly approved tax reform legislation Tuesday afternoon, sending the bill to the Senate on the wings of a powerful 155 – 9 bipartisan victory lap.  Speaker David Ralston closed debate with a rare appearance in the well, telling members to, “Vote Green!”

Ralston personally thanked A.D. Frazier, chairman of the 2010 Special Council on Tax Reform that traveled the state and took testimony from hundreds of Georgians before it submitted a far-reaching … and some would say, politically challenging … set of recommendations.

“Some of you who followed that Council know that even though he was one of my appointees, I really couldn’t do much with him!” Ralston told House members.  “He led what I believe is an effort that will continue to pay dividends in this state for many, many decades to come.”

House floor debate – scheduled to last three hours – was considerably shorter and entirely positive when it began in mid-afternoon.  Rep. Mickey Channell, chair of the special legislative committee on tax reform, began the debate by acknowledging “the completion of a fairly long journey” but he soon added, “HB 386 is not a comprehensive tax reform package.”

House Speaker David Ralston

Using phrases like “one more tool in that tool box” to attract new businesses, Channell and other speakers returned often to the impact on jobs.  He said eliminating sales taxes paid on energy used in manufacturing was a reason Caterpillar will locate a plant that employs 1,400 near Athens.   Channell said a sales tax exemption for projects of regional significance is an “important deal closer for our state” and “another matter that will help create jobs for the state.”

One by one other speakers including Minority Leader Stacey Abrams went to the well to support House Bill 386, which was immediately transmitted to the Senate.  The legislation combines new revenues and tax changes that Channell described as pro-business and pro-family.

On the taxes side, the annual ad valorem tax paid on vehicles would be gone, and sales tax paid on vehicle purchases would also be gone, both replaced by a one-time only title fee paid at the time of purchase, whether through a dealer or in so-called casual sales between individuals.

The marriage penalty that results in married couples paying more than single individuals would be gone under the legislation.  Tax-free retirement income would be capped at $65,000; it had been scheduled to increase annually but that will not happen.  Channell said even at the current cap, Georgia loses some $700 million per year in tax revenue.

A. D. Frazier, Chairman, Special Council on Tax Reform

Other tax changes include reinstating the sales tax holiday for school supplies for two years starting this fall,  elimination of a film production sales tax exemption because it did not work, new sales tax exemptions for agriculture, and a reduction in state sales tax charged on jet fuel sales.

The legislation also requires that all online retailers with Georgia customers must collect and remit sales tax.  The tax will not generate a great deal of revenue but supporters say it will create a more stable playing field for the state’s brick and mortar retailers.

Soon after the House voted, Georgia Chamber of Commerce President and CEO Chris Clark said the legislation would “attract new investment, encourage job creation, provide support to existing businesses and approve our overall competitiveness.”

Click here for coverage of Tuesday morning’s special committee on tax reform hearing.

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

March 20, 2012 Posted by | Uncategorized | , , , , , | Leave a comment

Tax Reform Bill Passes Out of Committee; Heads to House Floor Debate

Mike Klein

Georgia online shoppers could begin to notice changes in their internet purchase sales taxes three months sooner than originally announced.  The new effective date would be October 1 – just in time for holiday shopping – rather than on New Year’s Day which was the original date.

The announcement was made Tuesday morning during the second and possible final meeting of the House – Senate revenue committee that oversees tax reform.  House Bill 386 passed out of committee on a voice vote after a 13-minute hearing and no witnesses.   The bill moves to the House for debate and a possible vote today.  The track is fast; the bill was introduced Monday.

A 1992 U.S. Supreme Court ruling exempts retailers from having to collect and pay sales taxes in states where they have no physical presence – known as nexus. States have looked for an internet sales tax option since the ruling and especially since the Recession dwindled revenues.

New York in 2008 was the first state to expand the definition of “nexus” to include affiliates doing business on behalf of an internet retailer.  Rhode Island followed suit in 2009.  Sales taxes paid by out-of-state online retailers are often referred to as Amazon taxes because of Amazon.Com, the behemoth online shopping site.

Amazon and North Carolina went to war after the state imposed passed a 2009 law similar to those in New York and Rhode Island.  The online publication TechJournal reported North Carolina claimed Amazon or its customers owed $50 million in unpaid sales taxes dating back to 2003.  Amazon discharged all of its affiliates, which harmed those businesses.  TechJournal said there also has been a negative impact on start-up businesses.

Rather than fight with each other, last year Virginia reached an agreement with Amazon.  The company agreed to collect sales taxes just like any physical retailer.  The company also said it would open two fulfillment centers in Virginia, investing $135 million and creating 1,350 jobs.

The Tax Foundation position is that the so-called Amazon tax is unconstitutional.  It described the New York Law as “an unprecedented expansion of state taxing authority.”  It said exposure to these kinds of taxes would make it less likely for businesses to expand into those states.

Georgians are already required by law to monitor the sales tax they would owe by making online purchases from out-of-state retailers.  And in theory, they are supposed to pay tax to the state. The fiscal note attached to HR 386 admitted, “In practice, these use taxes are seldom paid.”

Estimated e-sales tax revenue would be small by government budget standards — $52.2 million for the state and $36.4 million for local governments – spread over fiscal years 2013 — 2015.  During the same period the fiscal note estimated that the state would lose $81.1 million and local governments would lose $56.8 million because of sales tax holidays for school supplies.

During Tuesday morning’s hearing Sen. Steve Henson asked House Majority Leader Larry O’Neal “why it took us so long to get here … really, why the last five days or so we’ve got a major tax bill for us to try to evaluate and do the best for Georgians.”

“There’s not one silver bullet as to why,” O’Neal said.  “I will assure you it’s not intentional to be done in any way to be deceptive to anybody or to hurry it by anybody for any reason.  If it were, it would be all new propositions.”  He added, “It’s finally time now to not let perfect get in the way of real, real good.  That’s why we’re dealing with it now, in my opinion.”

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

March 20, 2012 Posted by | Uncategorized | , , , | Leave a comment

Democrats Hooks, Thompson Led Charter Bill Across Senate Finish Line

Mike Klein

Senate Democrats intent on defeating a charter schools constitutional amendment vilified the legislation Monday afternoon.  Then four of their own including the Senate’s two longest serving members crossed the charter schools political divide to assure that Georgia voters will decide whether the state shall be allowed to approve charter schools when they vote in November.

George Hooks of Americus and Steve Thompson of Marietta have been in the Senate since 1991. They came to Atlanta as House freshmen ten years earlier.  Together they have walked those State Capitol corridors and heard thousands of speeches for some 60 combined years.

Monday afternoon Hooks and Thompson helped provide the difference in a charter schools bill vote that one day might be considered historic.  With 38 votes needed for two-thirds passage, Hooks and Thompson voted with the Republican majority.  They provided forceful political cover on a contentious issue.  The final vote was 40-to-16 with four Democrats in support.

Senator George Hooks

For Hooks, it was a personal decision.  The Sumter County schools that he attended as a youth and where his daughter now teaches first grade are in chaos and might lose their accreditation. Proclaiming that “My local people come first,” Hooks launched into a powerful oratory:

“I’m going to tell you one of the most heart-breaking things I have ever been through in my life was meeting with 128 mamas to talk about their children, black and white, rich and poor, young and old.  They are on the verge of catastrophe.  They have no faith, no confidence in our local school board,” Hooks told the quiet Senate.  “Maybe they are wrong but that’s the fact.

“If somebody has the power to take over that dysfunctional school board I will not stand in their way,” Hooks vowed.  “What they want is a state-chartered school system.  I am not going to face a tear-stained mama fighting to protect her child again.”  Shortly thereafter he concluded, “God bless each of you.  Vote your personal conscience.”

Thompson listened as three other Democrats spoke against the bill.  Sen. Vincent Fort called the legislation a “blatant corruption of power” that “trotted out” school children as “pawns to pad the pockets of for-profit management companies and real estate deals” supported by a “Herculean” lobbying effort that, Fort told the Senate, was “drenched in money mongering.”

Then Thompson – who once served as the Democratic majority floor leader – rose in defense of the bill.  “I went through one session when the public thought they didn’t get a chance to vote.  I don’t want to do that again because in the final analysis what some of you folks are forgetting is (Georgians) get to vote on this and debate it all summer and if they don’t like it they can make it go away,” Thompson said.

Senator Steve Thompson

“The other argument I hear that doesn’t make any sense (is) you don’t need to do this, you don’t have to do it.  Well, if you didn’t do it this way the public wouldn’t get to have their voices heard and vote on it.  Think of that.  I’m always going to be for public education.”

Thompson said he was assured by Governor Nathan Deal “that he is going to make it a priority that rural schools are not hurt and that some of these innovations will take effect in rural areas … I am not going to be accused of tying the hands of this administration when it wants to try innovation, or this General Assembly.  That’s where I’m at.  I’m going to embrace it because if you get afraid to change you become dust sitting in a car somewhere in a town where tumbleweed is rolling by you.”

All 36 Republicans voted yes. Hooks and Thompson were joined by Democrats Hardie Davis and Curt Thompson.  Democrats who worked against passage also offered two amendments that were both defeated.  One amendment would have rewritten the ballot question.  The other tried to ban for-profit education companies from doing business in Georgia.

Georgia Charter Schools Association CEO Tony Roberts singled out Governor Deal for his support since the unexpected Supreme Court opinion last May that declared the Georgia Charter Schools Commission unconstitutional.  The Governor approved several million dollars this year and next fall to make sure former charter commission schools will remain open.  He also named the constitutional amendment as one of his highest legislative priorities.

Asked about November, Roberts said, “The next strategy is how to keep the message ringing clear and true about what this will do.  There is going to be a lot of competing noise (around) the Presidential election.”  The ballot referendum needs a simple majority for November passage, a lower bar than the hurdle it just passed in the House and Senate.

“We’re tickled to death,” Roberts said.

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

March 20, 2012 Posted by | Uncategorized | , , , , , | Leave a comment