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Tuesday, March 25, 2008
Cut to the chase with meaningful tax remedies
The Atlanta Journal-Constitution
Lots of politicians’ jokes about tax cuts go over my head.
Standing on the marble floor between his office and the governor’s, Lt. Gov. Casey Cagle responded to a question about whether the governor agreed with the state Senate proposal to cut individual income taxes by 10 percent over five years. Sure, he said, the governor wanted to do away with the personal income tax altogether.
After a brief moment, the gathered crowd —- including senators lined up on the stairs behind him —- laughed.
I was looking down taking notes —- and missed any facial clues the lieutenant governor provided.
I didn’t get the joke.
It is perfectly reasonable —- supportable, too —- to argue that the state income tax should be eliminated altogether in favor of a consumption-based tax. It would be a big hit on revenue. The state’s individual income tax is expected to generate $9.5 billion next year; the corporate income tax, about $1.04 billion. The proposed state budget for next year is $21.4 billion, up from this year’s $20.5 billion.
A shift would have to be done gradually, just as Cagle and senators are proposing. Their plan would be a 10 percent reduction spread over five years, from a top rate of 6 percent to 5.4. In the first year, Georgians who pay income taxes would save about $215 million. The full reduction would save them $1.2 billion, Cagle said.
Sound tax policy would reward, and therefore encourage, work. On that point, the Senate is right. Coming eight legislative days before the end of the session, it’s only remotely likely that even if the Legislature dropped all other business, the House, Senate and governor could have the tax-policy debate that conflicting proposals warrant. House leaders say they had no clue, at any level, that the Senate had an alternative proposal before the day of the news conference.
Without question, taxes should be cut. As Senate President Pro Tem Eric Johnson (R-Savannah) and others noted, paraphrasing Ronald Reagan, “Government has a spending problem, not a taxing problem.” Said Johnson: “There is always a demand for more government spending. There is rarely a need.”
The questions are, how much, and what are fiscal conservatives attempting to achieve with the cuts?
The Senate proposal has the most obvious tax-policy merit. It encourages work and therefore personal and family responsibility.
The House proposal to reduce the ad valorem taxes on personal vehicles —- cars, trucks and motorcycles —- to $10 appeals in two respects. One is that, minus the bothersome $10 that keeps it from being a clean tax elimination, it gives relief to 93 percent of the households in Georgia. And it is meaningful: $672 million after two years.
The governor’s campaign promise to end the income tax on retirement income, it could be argued, is attractive as policy because it encourages a population to relocate to Georgia that doesn’t need jobs and that will, with its spending, create jobs in communities that need them. That targeted group would be spared $142 million with the exemption.
The governor proposes, too, to eliminate the quarter-mill in local property taxes that the state collects in all 159 counties —- but it’s not clean tax policy, either, because it holds open the option that the state can resume collections. The sum is about $90 million.
The winner? That’s the point of the debate nobody’s having —- and can’t in a few legislative days at the tail end of a session. And besides there’s real doubt that with the egos involved a productive policy debate is even possible.
The real role here for a leader would be to offer a vision of what fiscal conservatives are trying to do with government, a vision that would help to define the appropriate tax policy. What they all do agree on is that taxes should be cut.
They’re right, too. So do it. Don’t leave town without delivering meaningful tax cuts.
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