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Tuesday, January 16, 2007
Tax changes in the works — but slowly
The Atlanta Journal-Constitution
If Aghanistan is the graveyard of empires, as it’s sometimes called, genuine tax reform is the graveyard of idealism.
And yet, House Speaker Glenn Richardson (R-Hiram) is determined to go there. He is toying, conceptually at least, with the most ambitious and sweeping overhaul ever of Georgia’s tax structure — essentially moving the state toward greater reliance on consumption taxes.
His supposition, awaiting further research, is that a 5 percent tax on income and sales, to include services and Internet transactions, could bring about the elimination of property taxes and a slight lowering of the income tax. The top rate is 6 percent, and over time income has already become a virtual flat tax — joint filers get there at $10,000 and singles at $7,000.
What Richardson envisions is clearly a big idea and is a concept worth pursuing. But slowly. And that’s what he intends. Introduce the idea this year, act on it next.
It’s something of a fool’s errand, really, but Republican conservatives surely didn’t sit in the wilderness for decades to come to power and be the next generation of politicians splitting differences between ophthalmologists and optometrists, docs and hospitals and factions within the liquor industry.
It’s a fools’s errand because every loophole has a political origin and a protective constituency. And, furthermore, the tax reform offerings continue.
The second-ranking member of the House, Speaker Pro Tem Mark Burkhalter (R-Alpharetta), proposes to eliminate the property tax on motor vehicles, which he calls the “birthday tax” because 93 percent of Georgia households own at least one vehicle and the tax falls due on their birthday.
Gov. Sonny Perdue ran on a pledge to eliminate the state income tax on retirement income for people over 65 — and the General Assembly will approve it. He suggested, too, in last week’s State of the State that “we pass legislation to exempt material and equipment used to build biofuel facilities from state taxes.”
Another group in the Senate, meanwhile, is exploring a cap on state spending tied to increases in population and inflation. A number of other states are considering that; Colorado actually did, but voters sabotaged their own discipline later by approving an amendment that required the state to increase spending for k-12 education by one percentage point above the formula, regardless of revenues.
Richardson, in any event, opposes a constitutional cap on spending.
Proposals are being floated, too, to raise state, local or regional sales taxes — which, if passed, would further compound the difficulty of major tax reform.
This debate, regardless of where it leads, is essential for a party just settling into the business of governing. In theory, the new party comes to power with no obligation to protect the other party’s sacred cows. They’re not invested in what’s broken so, in theory, they can invest in a fix. Give them a few years to settle in and the newcomers will be just as protective of turf and loopholes as those who created them.
Grants of tax exemptions, whether for food, the scores of sales-tax exclusions or retirement income, happen because legislators and governors have always used them to win elections. That’s not to suggest many or most, like the proposed biofuel exemption or the retirement-income exclusion, don’t have merit. But, as Richardson notes and as my working years confirm for me, the young are far more in need of income tax breaks than the elderly, especially during their child-rearing years. “But,” he says, wincing with the observation, “they don’t vote.”
Richardson thinks the Legislature has a two-year window to act. Beyond that, it’s into gubernatorial politics and the momentum’s gone.
Revision on the scale he envisions is an idea to be sold slowly. Georgians are not given to sudden changes or to embarking on new concepts that affect their pocketbooks. Too, while he insists that revision be revenue-neutral, expanding the sales tax to services is an idea long promoted by liberals looking for ways to get the “wealthy” to pay more, so that social services can be expanded. And taxing Internet transactions is, unsurprisingly, a push that originates with states looking for “lost” revenue.
The debate on who should bear the burden of government and what that burden should be is ripe. With every tax and every loophole and every dollar of spending, government encourages or discourages some behavior . Maybe Richardson is on a fool’s errand, but whatever the outcome, it will be a useful one.
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