Huge tax package unveiled. But will it pass?

Gavel

A sweeping — and curious — bill to overhaul much of the state’s tax code was introduced Monday. Let me try to explain what I mean by both of those words.

I call it sweeping because, really, there’s no other way to put it. The gist: It would lower the state’s income-tax rate (both for individuals and corporations) to a flat 4 percent from the current brackets ranging from 1 percent to 6 percent. It would raise the state’s sales tax to 5 percent from the current 4 percent. It would add the sales tax to groceries (local governments already tax them) and to “digitally delivered goods”: think iTunes and software downloads. It would create a 7 percent “communications service tax” to cover cable, satellite and streaming services (e.g., your Netflix subscription). It would raise the cigarette tax to $0.65/pack from the current $0.37/pack. It would eliminate dozens of tax credits and exemptions for individuals and businesses, including Delta’s partial exemption from sales tax on jet fuel — these eliminations account for much of the heft in the 81-page bill. It would begin implementing these changes as soon as Jan. 1, 2016, but some of them would be phased in between then and 2019.

Like I said, that’s a pretty sweeping bill.

It’s also a bit curious because of the timing. On the one hand, state Rep. John Carson, R-Marietta, introduced it at a press conference flanked by, among others, Speaker David Ralston, Speaker Pro Tem Jan Jones, Majority Leader Larry O’Neal and Majority Whip Matt Ramsey. They had handouts for the reporters and printed signs for the TV cameras. The House took the somewhat unusual step of allowing it to be read for the first time the day it was introduced, speeding up the legislative process for it just a bit. (That’s unusual not because members object when it’s requested, but because it isn’t requested all that often.) You might also recall that, back in December, Ralston told me tax reform was his top priority when it comes to jobs-related bills.

On the other hand, yesterday was day 20 out of 40 in this legislative session, and Ralston pointedly would not commit to getting it passed this year (which, let’s note, is consistent with what he told me in December). Better, he said Monday, to get it right than to do it quickly. It would not be unheard of for such a sweeping bill to make it through one chamber in 10 days — by rule, bills must clear the House or the Senate by day 30 if they are to have a chance to clear the other by day 40 — but it would be a rather daunting task. Although Carson said the bill should be either revenue-neutral or a slight tax cut, it still needs a fiscal note to establish whether the math officially adds up. That might not be ready until the end of this week or beginning of next week.

So, I’m not sure what to make of the bill, and not just because I’m still going through its 81 pages.

It is generally the kind of change that the state needs to update a tax code that still largely reflects what the economy was like in the mid-20th century, and to help keep Georgia competitive with other states when it comes to attracting, retaining and growing businesses. Many of its provisions dovetail with the recommendations a special tax reform council offered back in 2011. Carson said the bill should result income-tax savings of $400/year for a family at the median household income of $48,000, although any net savings would depend on how a household spends its money. Services, which largely remain untaxed in Georgia, make up an estimated 70 percent of the economy  vs. 30 percent for goods — which ought to mean savings for any household whose spending has a similar services-to-goods ratio. But I don’t know if that ratio holds up for all or most households. It will also be interesting to see what kind of economic effects the bill is forecast to have.

All of which is to say, put this bill on your radar — but let’s wait and see exactly how what kind of impact, economic and legislative, it ends up having.

Reader Comments 0

32 comments
GMFA
GMFA

Please read Jay's column on this very topic for a better viewpoint!

MHSmith
MHSmith

It would create a 7 percent “communications service tax” (a.k.a "Internet Access Tax" ) to cover cable, satellite and streaming services (e.g., your Netflix subscription).


.


Oops... there it is. Only the name was changed slightly to protect the guilty, the crime is the same one.


Hate it when I'm right, don't you?!  LOL

Wascatlady
Wascatlady

Well, for most poor folks they buy way less services than goods, so it would be a negative hit for them.  For those who actually have money to save, it would be good.  Or if you can hire folks to do what you need done, you save. Those who have to do virtually all of it themselves lose.


But of course that is foregone.

notagain
notagain

Jobs related bills.We need repair the roads,bridges etc, so we can handle the added traffic more jobs would create.Not create more jobs and more traffic jams.

FIGMO2
FIGMO2

It's as if they're putting it out there to see what kinda response it gets before moving forward.

Spaghetti meet fridge. 

Plumb Krazy
Plumb Krazy

Any poll that lives within 100 miles of me who votes for this or a fuel tax increase i will work to have replaced. I dont care what party they belong to.

stogiefogey
stogiefogey

Action on lowering Georgia's too high 6% marginal income tax rate is long overdue. Republicans have the requisite numbers in the House and Senate to pass this IF it can be made revenue neutral, and a governor who will sign it in a heartbeat. I'd rather they focus their time and energy on tax reform than some chimera like religious liberty.

Plumb Krazy
Plumb Krazy

@Bumper15 "Revenue neutral" is a clever way of saying "transfer tax burden". Sales taxes are already way too high especially after you add LOST and SPLOST sales taxes into the mix.

TicTacs
TicTacs

@Bumper15  This is a stupid idea, and you like it ?  What does that say about you ?

SGAMOD
SGAMOD

GA has itself in a mess with all the tax breaks and cuts that have been made under the guise of a poor economy (typical republican move).  Now with the a crippling infrastructure and other resources needed let's change the tax code to cover up for our previous mistakes.

LogicalDude
LogicalDude

Well, the gist of the bill seems to be:  Let's raise taxes on the middle class and poor! (the ones most impacted by those sales taxes).   And then they make it harder for all companies worldwide to do business with Georgia with the special internet tax (which is universally disliked).

On the other side, it's good to see some of the special interest tax breaks companies get will be reduced.  Some tax breaks can be beneficial, but too many just makes it look like Good Ol' Boys are getting the breaks. 


Hey, it's good to see they are working on something and discussing it, but it always seems to come down hardest on those most unable to pay.   



TaxiSmith
TaxiSmith

I'm quite sure they'll figure out new and interesting ways ti empty the taxpayer's pocket. Left or Right, they're politicians, and they must be fed.

Wascatlady
Wascatlady

@TaxiSmith The difference will be WHOSE pocket gets emptied.  It will be by class.

MarkVV
MarkVV

Let’s hope that the chances of this bill – or anything close to it - are between slim and none, and that it will end up where it belongs – in the dustbin. It is an arch-conservative effort, regressive and full of anti-provisions. Anti-clean energy, anti-disabled, anti-disaster assistance, anti-child care.

Don't Tread
Don't Tread

This is made to look like a tax "break", when in fact it appears to levy new, higher taxes on things like groceries.  I'm all for a consumption-based tax system but essentials (such as food, housing, utilities, medical care) should never be taxed.

TicTacs
TicTacs

Progressive income tax is the most fair,  these taxes are presented by the greedy.

ATLAquarius
ATLAquarius

Kyle


In your opinion does the effort allow the state to adequately fund its operations while giving the taxpayer their $100 a year or whatever the number is in relief? Lowering taxes is fine in principle but not if you're just going to hit everyone with "user fees" to compensate


Kyle_Wingfield
Kyle_Wingfield moderator

@ATLAquarius I'll withhold judgment on that until I've seen a fiscal note. Right now, I'd just be taking a wild guess.

RafeHollister
RafeHollister

I didn't get to finish my previous post as this blog software seemed to be on the fritz, at the time.  


Many of us think we need to work on tax reform and move away from the income tax, to become more competitive with neighboring states, but this does not sound like a serious attempt, more like a "we tried, sorry" attempt.  The timing itself, lends me to think that, but the new taxes seem to be poison pills to kill the bill.  


You have to come up with less onerous ways to come up with revenue to replace income tax revenue than this.  Being on the far right, it is strange to have this thought, but taxing groceries and cable TV just seems unnecessarily "regressive" to me.  If they are serious about tax reform someone needs to come up with something better.  If I can see that, what do you think the Dems are going to think.  I would rather they raise the sales tax another penny, eliminate more special interest tax breaks, implement more user fees, in order to keep the tax off groceries and other "essentials".

IReportYouWhine#1
IReportYouWhine#1

What are the yearly revenue projected increases or decreases? This seems to be on the increase side.

Kyle_Wingfield
Kyle_Wingfield moderator

@IReportYouWhine#1 They say it should be neutral or on the decrease side, but they won't have the fiscal analysis for at least a few more days. (They can't order a fiscal note until the bill has been introduced.)

LogicalDude
LogicalDude

@Kyle_Wingfield @IReportYouWhine#1 I'll be interested to see the results.  I'm sure all those untaxed Netflix accounts will generate a fair amount. (But again, people and companies hate those kinds of taxes)

RafeHollister
RafeHollister

Surprised at the timing.  If they wanted it to pass, they would have introduced it earlier, unless they thought they could ambush the Dems and catch them unprepared.  Seems Ralston has no expectation that it will pass this year, which is wacky.  As you say, it doesn't make a whole lotta sense, typical for the Ga Legislature.  Why introduce something and give your opponents a year to pick it apart?  This almost seems like one of the tricks our establishment GOP in Congress often play, trumpet and promote ideas the base supports, but deep down have no intention of actually working hard to get it accomplished, because they disagree with the base. 


Bill sounds like a step in the right direction, but there seem to be several poison pills already included, like the tax on groceries and more taxes on media

Caius
Caius

“It would lower the state’s income-tax rate (both for individuals and corporations) to a flat 4 percent from the current brackets ranging from 1 percent to 6 percent.”

Say I am paying 2% and they "lower" it to 4%, how am I getting a decrease in taxes?


Or say, the millions in GA on Social Security get a tax increase when they raise the sales tax?


Sounds like Grover is going to call this a tax increase.

Kyle_Wingfield
Kyle_Wingfield moderator

@Caius The 4% bracket currently begins at $3750 of taxable income (single person). So let's say your taxable income is $3000. Under the current system, you'd pay $60. Under this system, you'd pay $120. But that's assuming there aren't changes to the standard deduction or other provisions for calculating taxable income; I haven't gone through the bill closely enough to be able to say.

Finn-McCool
Finn-McCool

Tax changes from Republicans? Bend over, Georgians. Brace yourself.