Moderated by Rick Badie
Georgians of varied economic stripes might benefit from state tax reform, but in what form? Earlier this year, a state representative presented a bill that would shift the tax burden toward more consumption taxes and lower personal income and corporate taxes. He writes about misconceptions around that proposal. Meanwhile, a policy analyst suggests alternatives to such a tax shift and champions creation of a state Earned Income Tax Credit. The third column, penned by a young conservative, encourages millennials to join the green building movement.
Tax change to take less of your money
By John Carson
Earlier this year, I introduced the More Take Home Pay Act (MTHPA) to reduce the state income tax rates and diversify revenues towards more of a consumption tax. The goal has always been to address theoverdue need for commonsense restructuring of the state tax code and allow Georgia families to keep more of their money.
Although Georgia is among the top five states in the country to do business, we must always strive to become even better — particularly since we have the second-highest income tax rates among our border states and were recently ranked by the Tax Foundation as having the eighth-worst income tax climate.
Some have expressed concern over such a large initiative. I stand in total agreement that efforts to change Georgia’s tax structure must be done in a way that will protect our coveted AAA bond rating and ensure stable revenues for funding vital state programs. As such, I continue to believe it is important to remain transparent and dispel common myths related to the bill.
- The MTHPA eliminates the income tax. Not true. The bill incrementally reduces the personal income tax rate from 6 to 4 percent and the state corporate tax rate from 6 percent to 5 percent over three years.
- The MTHPA significantly cuts taxes. We are managing the revenue estimates to be revenue-neutral, or a slight tax cut. Other states, like Kansas, have suffered from tax rate reductions without considering the need to stabilize and replace revenue. By reducing the income tax rate and transitioning to more of a consumption tax, Georgia will maintain its ability to fund critical state obligations. Keep in mind Georgia was recently ranked by the Tax Foundation as having the 49th-lowest state tax burden.
- The MTHPA will damage Georgia’s AAA bond rating. The rating is a major factor to low interest expense on our bonds and economic development. As a finance professional, I fully understand the impact of the AAA bond rating. Georgia has approximately $9.5 billion of outstanding bonds. If our bond rating dropped, for example to AA, the interest rate paid on 20-year bonds could increase by 0.25 percent, which would result in $23 million to$25 million of additional interest expense. According to economists, bond rating analysts look for diversity and flexibility in our state’s revenues; the MTHPA improves both.
- Income taxes are a more stable source of revenue. By studying more than 12 years of state revenue to date, we have determined our consumption tax is as reliable as income tax, as compared to state GDP. In addition, this consistency has been achieved even before addressing the loopholes in the current consumption tax laws.
- The MTHPA “pays for” an income tax cut with taxes on other goods and higher cigarette taxes. The additional state revenues from these items would generate less than $400 million annually, whereas it takes a whopping $2 billion or so to reduce the state income tax by just 1 percent. The provisions addressing these taxes are for parity in the free market and average rates among our border states.
Finally, the More Take Home Pay Act does not tax certain purchases as suggested in previous proposals, such as Girl Scout cookies, Boy Scout popcorn, lemonade stands, etc. It continues to exempt haircuts, nail care, dry cleaning or any other personal care services. Additionally, doctors, lawyers, or any other professional services are exempted.
Finally, this legislation is not an elimination of the state income tax or a multi-billion dollar tax cutor a transition towards unstable tax revenues. It is, however, a major step towards lowering our state income tax rates and diversifying towards more of a consumption tax.
It is your money, not the government’s. You keep more of it, and you and your family decide how to spend it.
State Rep. John Carson, a Marietta Republican, represents District 46.
Let’s find a better way to fix Ga. taxes
By Wesley Tharpe
State lawmakers can seize a real opportunity to improve the lives of Georgia families if they take up the topic of comprehensive tax reform in the next legislative session. First, they’ll need to discard misguided plans to slash income tax rates and raise sales taxes that make pending tax proposals untenable.
Reforming Georgia’s outdated tax system is a perennial hot topic at the state Capitol. The debate could be coming to a head, as legislators appear poised to take up House Bill 445, a multi-part tax proposal state Rep. John Carson, R-Marietta, unveiled early this year. Among the proposed changes are a drastic cut to Georgia’s income tax, a higher state sales tax and a return of state taxes on groceries. Some provisions, like raising Georgia’s bargain-basement tobacco tax, are worthy of broad support.
But the bill as a whole needs fixing. It would shift the cost of government further onto low-wage workers and the middle class, while harming core state services like education and public safety. Better options exist.
The heart of the plan’s approach is to slash Georgia’s personal and corporate income taxes and try to recover the lost revenue with higher sales taxes. That hits the average Georgian with a double-whammy and leaves many families worse-off.
Why? Typical Georgians are likely to pay more in taxes in exchange for fewer services.
Higher sales taxes hit middle- and low-income families hardest, since they use most of their income just to get by. That would prove especially true if lawmakers eliminate Georgia’s state-level exemption for groceries, which former Gov. Zell Miller ushered through the Legislature in 1996. On the other hand, most of the value of income tax cuts flows to wealthy households and corporations at the top. Most working families would likely gain too little from income tax cuts to offset higher sales taxes.
The quality of state services could also deteriorate as a result of a tax shift, further compounding harm to average Georgians. Carson’s plan will cost the state treasury an average of about $800 million a year in the five years after its passage, according to the state’s official estimate that assumes lawmakers approved it in 2015. That’s more than double Georgia’s annual technical college budget.
It is not surprising the plan would blow such a big hole in Georgia’s budget, given the track record of similar plans in other states. Kansas adopted one of the largest state income tax cuts ever in 2012 and tried to make up some of the shortfall through higher sales taxes. The net result: Bone-deep cuts in schools and local services paired with a damaged credit rating that costs the state treasury additional money through higher interest payments.
In 2013, costs for a similar plan in North Carolina led to sweeping cuts in that state’s vaunted university system as well as support for other community assets. “It’s one thing to be frugal about government budgets. It’s another to give money away in tax cuts when the state is falling short of meeting its needs,” stated a Raleigh News & Observer editorial.
Georgia, meanwhile, can blaze a better path.
Lawmakers can explore more-targeted reforms, like raising the standard deduction or creating a state Earned Income Tax Credit. Both cut taxes from the bottom up rather than the top down. They can safeguard the state’s investments by offsetting any new tax cuts with a synchronized scaling back of outdated tax breaks and deductions.
The Georgia Budget and Policy Institute will unveil its detailed state tax reform blueprint later this month as one sensible alternative for lawmakers to consider. I hope othersbring worthy ideas to the upcoming debate.
One thing is for sure: A drastic shift from income to sales taxes is a flawed approach to reform.
Georgia can do better.
Wesley Tharpe is a senior policy analyst with the Georgia Budget and Policy Institute.
Millenials embrace LEED
By Demetrius Minor
Being involved in an industry affiliated with opposing political views has helped me see different points of view. But I was always more interested in finding what my friends and co-workers had in common despite our disagreements. Like many millennials, in my civic life and career, I am tired of the strident divisiveness that paralyzes our country and leads us to miss the mark America represents.
Some may think that, as a conservative millennial, I may have a hard time connecting with peers who often hold different political views. That simply is not true. When facing different points of view, I’ve always strived to find common ground. What does that mean for the future? Perhaps it means a little less divisiveness and a little more common sense when it comes to policy on all levels.
Last month, the U.S. Green Building Council and Booz Allen Hamilton announced new research looking at the economic impact of green construction and LEED-certified building construction. Leadership in Energy and Environmental Design (LEED) is the council’s system for rating the sustainability of buildings. It measures whether a building is environmentally friendly and people-friendly. LEED currently certifies about 1.85 million square feet of building space every day across the globe.
Conservatives and the private sector could lend a hand to commonsense policies with regard to the environment by supporting programs like LEED. LEED-certified buildings are constructed to be sustainable, energy-efficient and cost-saving.
The study has some significant findings for the private sector. It shows green construction is positioned for a growth rate that outpaces traditional construction over the next four years. During that same period, LEED building projects are expected to save $2.4 billion in energy costs. More immediately, the report finds that, in this year alone, green construction is slated to have a total impact on employment of more than 2.3 million U.S. jobs.
In Georgia, which ranked eighth in 2014 for total LEED-certified square feet, LEED construction will support almost 100,000 jobs between 2015 and 2018. That means nearly $5.8 billion dollars in wages for Georgians over that time period.
Over the next four years, the sustainable construction industry is expected to save $2.5 billion in energy costs.
As a conservative person concerned about the future, being a good steward of our environment is a moral decision for me. Making good business decisions and making moral decisions is the foundation of American exceptionalism.
Millennials need to step up and be involved in the process. We live in an “American Idol” world where we expect immediate results, but without proper and responsible planning, we will miss the mark. Commonsense, sustainable building efforts are not only economically sound in the long-run; they are conservative in principle.
Demetrius Minor, author of “Preservation and Purpose: The Making Of A Young Millennial and A Manifesto for Faith, Family and Politics,” is the pastoral assistant at Calvary New Life Tabernacle in Atlanta.