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Tuesday, May 8, 2007
Tax proposal tests GOP’s reformist zeal
The Atlanta Journal-Constitution
The army of alphabet-soup interest groups marshalled to oppose vouchers for special needs children was sandlot football compared to the army that will gather to oppose any serious effort to overhaul Georgia’s tax structure.
The alphabet-soup armies, most funded directly or indirectly by taxpayers, consisted largely of groups protecting their public school turf. That conservatives succeeded despite the odds is a career achievement for state Sen. Eric Johnson (R-Savannah), the voucher bill’s sponsor, and for House and Senate leaders. The victory was a decade or more in the making.
Comes now tax reform, the Big Idea being advanced by House Speaker Glenn Richardson (R-Hiram) and other House leaders. As proposed, most state and local taxes would be eliminated, replaced by an income tax and a value-added tax of 5.75 percent. Among those targeted for elimination are all property taxes, local sales taxes, and taxes derived from motor fuels, insurance premiums, workers’ compensation, estate, business and occupation taxes, intangible and utility taxes, among others.
The state would collect a flat 5.75 percent income tax — the top rate now is 6 percent — and a 5.75 percent value-added levy that is added in to the cost of goods and services. The state sales tax now is 4 percent, but local levies push that up. Tops in the state is the City of Atlanta in Fulton at 8 percent.
To achieve the flat rate, income tax deductions would be limited to charitable contributions, mortgage interest, Social Security and unemployment benefits, tax-exempt income and rental payments for a primary residence. The value-added tax is similar to a sales tax, but it’s built into the cost of goods and services. Businesses would pay based on total sales, minus depreciation, bad debts, charitable contributions, and most goods and services purchased. Revenues collected by the state would be divvied up to local governments.
Without question it is the biggest of the Big Ideas to come from the Gold Dome in our lifetimes. It’s a legacy idea. Bold. So daring that the very suggestion that such comprehensive legislation will be considered draws legions of hand-wringing critics who fear that its simplicity and transparency will crimp politicians’ ability to creep levies higher. With two primary levies, an increase will be a much-publicized debate.
Should Georgia switch? It’s far too premature to decide. The debate has not yet begun. Nothing legislators attempt approaches tax reform in degree of difficulty. Not only is every perceived advantage in the tax code protected by special interests, but Georgia is developing a vocal cadre of liberal advocates for higher public spending to grow social programs. And, of course, local governments are likely to join the opposition, since the tax revision being proposed would take away their authority to levy most taxes.
Tax revision on this scale really is not an idea that should emanate from individual legislators — and not because they lack the expertise or standing, but because explaining it requires an enormous marketing effort using the media, civic clubs, chambers of commerce, business and social networks, tax experts and individual legislators.
Without the governor and lieutenant governor leading the charge, or at least actively involved, the prospect of so much change at once is so frightening to so many that the armies of the status quo will destroy the outgunned reformers before they decamp. Under the state constitution, tax legislation has to originate in the House, but that does not preclude the governor or lieutenant governor from embracing tax simplification or reform as part of the conservative agenda. Of course, the governor and House leaders could also have embraced a flexible cap on spending — the resolution offered by state Sen. Chip Rogers (R-Woodstock) and passed on a bipartisan basis in the Senate — and neither has.
It’s been remarkable how quickly this new conservative majority has grown dysfunctional. Big Ideas fall to individual legislators, who maneuver them through by their own wit, skill and drive. Man, we could have gotten this under the Democrats.
If the top leadership is incapable of putting forth and rallying around something, anything, that provides evidence that it matters at all that the party of fiscal and social conservatives is charting the course, this revolution will be over before it strikes its course.
Tax reform may not be the right Big Idea — but at least it is something.
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