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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

Georgia Tax Reform Council Final Report on Hold Until Next Monday

Mike Klein

The Georgia Special Council on Tax Reform and Fairness convened what was expected to be its final public meeting Wednesday afternoon in Atlanta.  Council chair A.D. Frazier trimmed expectations at the outset when he said recommendations will not be ready until next Monday afternoon. So this process that began five months ago will last at least five more days.

Frazier said the Council expects to propose creation of a new Tax Court to streamline citizen complaint hearings.  It will suggest legislators wait until next year before they vote on what Frazier said could be 50 pages of recommendations.  The Council is expected to suggest this analysis should be undertaken every four years. The last analysis was several decades ago.

“I didn’t want you to go away completely empty-handed,” Frazier told about 100 reporters, lobbyists and government affairs experts during his Atlanta presentation.  Council proposals will be reviewed with Governor-elect Nathan Deal, Lieutenant Governor Casey Cagle and House Speaker David Ralston before public release. None were in the room Wednesday afternoon.

A. D. Frazier

“We’ve tried to come as close to being revenue neutral as we could,” Frazier said. “It’s important for us to not lose the triple A bond rating.” The chairman said the state’s corporate tax rate, currently 6%, is not “nearly the driver in business decisions to locate here as we thought.” He said personal income tax rates, also currently 6%, are at least twice as important or more.

The 2010 General Assembly created the Special Council on Tax Reform to propose ideas to stimulate economic growth.  As a byproduct these ideas would also stabilize state government revenue and make it more predictable during economic downturns. The Council faces a deadline not later than next Monday to submit the final report. None of its proposals are binding on the General Assembly.

The final document is expected to discuss corporate and personal income taxes, motor fuel, cigarette and groceries sales taxes, corporate sales tax exemptions, new taxes on professional services and changes to communications industry taxes. Frazier said Georgia ranks 49th nationally in state taxes per capita, meaning just one state imposes less tax on its citizens.

Frazier reiterated tax policy should enable Georgia to remain competitive with its neighbors in a tax policy environment that will ensure predictability for industry and local governments. Frazier said the Council will not have any recommendations about local property tax reform.

Georgia’s economy has shown some signs of a rebound, but it is a long way from being healthy.  State revenue plunged and state agency expenses were markedly reduced during the economic downturn largely because revenue from personal income tax receipts went into a free fall.

Recent monthly revenue numbers are improved. Every month since June has shown a year-to-year gain. But the next state budget still faces a shortfall that could be up to $2 billion. Georgia has reduced expenses by some 20% since the economic downturn began in December 2007. “We’re lucky,” Frazier said, noting some states face deficits reaching tens of billions of dollars.

Mike Klein is Editor at the Georgia Public Policy Foundation.

January 5, 2011 Posted by | Uncategorized | , , , | Leave a comment

Tax Reform Matters: “Very Little Has Been Done For Decades”

There is nothing flashy about a couple hundred people crowded into a room where the discussion is about state government revenue strategy.  As a photo opportunity, it’s not a great one.  But in Georgia, there might be nothing more important going on during these hot summer days.

The Special Council on Tax Reform and Fairness gaveled itself into action this week in Atlanta.  Media, lobbyists and others with skin in the game filled a huge conference room.  This fall the Council will propose ideas to stabilize state government’s wobbly income stream and make it less vulnerable to economic downturns.  The impact on Georgians could be profound. Continue reading

July 29, 2010 Posted by | Uncategorized | , , , , , , , , , | Leave a comment