As the Georgia state legislature winds down this year one of the biggest issues yet to be resolved is the proposed revision of our state’s tax code. There are only a few days left for legislators to get the law known as HB 387 passed so some fast and furious horse trading is going on under the gold dome and the final result could affect every tax payer in Georgia.
This article in the AJC provides a good summary of what is happening. Here are a few of the highlights:
A bill that would cut the state income tax rate and shift taxes to some services is headed for a vote in the Georgia House.
The proposed changes in HB 387 would lower the state income tax rate from 6 percent to 4.5 percent, but limit how much income can be deducted. The bill gives tax breaks to manufacturers and agriculture, creates a 7 percent tax communications services, charges sales tax on private sales of cars, and taxes auto repair and maintenance services.
House Ways and Means Chairman Mickey Channell, R-Greensboro, said most people will not see much change in their overall tax bill as a result of the changes. But he said the lower income tax rate will help attract new businesses by making Georgia competitive with Florida and Tennessee, which do not have an income tax.
House Minority Leader Stacey Abrams, D-Atlanta, said a Georgia State University analysis of the changes show the changes benefit the rich, keep taxes the same on the poor and raise them on the working and middle classes. The increase comes on taxpayers who itemize their taxes, she said.
GOP politicians are trying to shoehorn the changes into the final days of a hectic legislative session. The House likely will take up the legislation Wednesday, setting up a possible Senate vote as early as Friday — the 38th day of a 40-day session.
Any delays would bump a Senate vote to the last two legislative workdays: April 12 or April 14.
One other key point of the legislation that wasn’t emphasized in the article is that charitable donations to churches would no longer be tax deductible. That means families would no longer be able to deduct the amount they tithe to their church on their income taxes. As a result the new tax law is drawing the ire of the state’s religious organizations. You can read about that angle more here at peachpundit.com.
The AJC columnist Kyle Wingfield also discusses the bill and his perspective is that an imperfect bill is better than no bill at all. Kyle puts it this way:
Raising taxes in a slow-to-recover economy is a bad idea, but cutting taxes meaningfully in a slow-to-recover economy has proved to be more than our legislators can bear. If you want to know what they really mean when they talk about smaller government, take a look around — because it has become quite apparent that this is as far as they intend to go in cutting.
They’re not going to cut any farther than revenues require, and the state Constitution mandates that they balance the budget each year, so reducing revenues even further seems to be out of the question.
So assuming all of the above reports are true this is the way I see it:
1.) Georgia state legislators wants to lower our state income tax rate because it hurts the state when competing for employers against other states that have no income tax.
2.) The legislature could reduce taxes and reduce spending but they refuse to do that.
3.) Instead of reducing spending the Republican proposal raises taxes that primarily impact middle class taxpayers and churches while lowering taxes on people in lower and higher income tax brackets.
4.) There isn’t much time to get all of this done so the bill is being rushed through the legislative process without much time for the public to inspect the details and determine how it will affect their families.
Based on those points I find it hard to believe HB 387 is better than the status quo. I am glad that the legislature realizes Georgia’s state income tax is a problem and I support their effort to correct the situation. I just don’t see how the reallocation of that burden to middle class tax payers already employed in Georgia is a better situation. I also believe that politically the Republican party of Georgia would be making a huge mistake by playing into the stereotype of ”the party of tax cuts for the rich”. Especially when the issue penalizes religious institutions.
When it comes to the tax code it is more important to get it right than get it done. That being the case I hope HB 387 doesn’t get done this year.