The General Assembly overwhelmingly approved a major tax reform package two years ago that slashed taxes on energy, jet fuel, construction materials and auto sales. Farmers received a hefty financial boost with the demise of the sales tax on dozens of agricultural products.
So too did 13 legislators.
Sen. Tommie Williams, a Republican who once served as the chamber’s president pro tem, no longer pays the 7 percent sales tax on chemicals and other farm goods for his olive oil business in Lyons. Rep. Tom McCall, a Republican who chairs the House Agriculture Committee, is exempt from paying taxes on feed and fertilizer for his Elberton farm.
They, and 11 other legislators, voted for the tax reform bill that included the sales tax exemption. Critics argue that their votes smack of conflicts of interest since they benefit from the tax break.
“This is a pretty classic illustration of it,” said Gary Horlacher, a lobbyist and Democrat who once ran unsuccessfully for Secretary of State on an ethics reform platform. “The reality is agriculture is a very valuable resource in Georgia. But this is another example of people on the inside knowing how the game is played and benefitting from it.”
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Legislators have the option of recusing themselves from votes on issues that might affect them financially.
Rep. Terry England, who owns a Barrow County farm, said he weighs the possibility that such votes could be conflicts.
“I’ve had that battle with myself before when we had things we voted on like that,” said England, a Republican who chairs the House Appropriations Committee. “Truth is, anything we vote on could be a conflict of interest. Lawyers could have a conflict on just about every law we pass.”
No senator opposed the Georgia Jobs and Family Tax Reform Plan in 2012 and only nine representatives did in the House. Billed as an economic development boost, HB 386 is supposed to one day make up for any short-term loss of sales tax dollars for the state and counties.
The state typically collects four pennies in sales taxes on every dollar spent. Counties can receive up to three pennies per dollar.
The exemptions were widespread; cutting the annual ad valorem, or “birthday,” tax on vehicles; slashing sales taxes on energy used in factories, fuel for airplanes and building materials. Exemptions for married couples filing joint tax returns were increased. In addition, the sales tax holiday returned and more taxes were collected on Internet purchases.
Farmers and others involved in agriculture can exempt sales taxes on feed, seed, fertilizer, tractors, fencing, lumber, diesel, chemicals and dozens of other products. More than 32,000 Georgia Agricultural Tax Exemption, or GATE, cards have been issued by the state’s agriculture department. Roughly 1,200 of the cards belong to out-of-staters.
Not surprisingly, rural counties suffer most the loss of sales tax revenue. State coffers were expected to take a manageable $42 million loss of revenue over three years due to the agricultural exemptions. Counties would lose $30 million, according to the state auditor’s projections.
Critics, though, say the financial hit is much deeper in ag-heavy South Georgia. Cities, counties and school boards, for example, received $190 million less in sales tax revenue in 2013, as the economy was improving, than they did in 2012, according to the state Department of Revenue. The ag and ad valorem exemptions received most of the blame from city budget directors and school superintendents interviewed by the Atlanta Journal-Constitution.
Lowndes County, for example, lost $2.3 million in sales tax receipts between 2012 and 2013, according to state revenue records. Valdosta, the county seat, raised property taxes last June to make up for the sales tax shortfall — the first increase in 22 years. Bainbridge, Tifton, Moultrie and Pelham have also raised property taxes this year.
Still, there’s no way to know how much the tax cuts cost state and local coffers — or how much the 13 legislators are saving — because the state hasn’t audited the program.
“Local, rural communities are getting killed by the (tax) bill,” said Rep. David Wilkerson, a Democrat from Austell who opposed HB 368. “It’s completely appropriate to look at who benefits from it and the impact it has on local communities. There’s nothing wrong with local communities putting pressure on their legislators.”
Senator-elect Ellis Black, a House member when he voted for tax reform, represents Valdosta, Lowndes County and the surrounding rural area. He also owns four farms, totalling 500 acres, that he contracts out for cotton and peanuts. The GATE cards comes in handy for diesel and spare parts for tractors, as well as energy to irrigate crops. Black, a Republican, sees no conflict of interest.
“I’ve been in the (legislature) 14 years and I’ve never seen anybody vote for a law for his personal benefit,” he said. “A lot of times people up there take a position that is favorable to their industry.”
The wallet-size GATE cards are easy to get: an online application runs $20 a year. “Qualified agricultural producers” who earn at least $2,500 a year farming or in an agriculturally related business are eligible. Georgia previously allowed sales tax breaks on a variety of ag products. But the General Assembly greatly expanded the exemptions in 2012.
Sen. Williams, who made his millions in the pine straw business before producing award-winning olive oil, says he basically receives the same tax break now as before he applied for the GATE card.
“I purchase chemicals every day to spray olives,” said Williams who saves about $350 a year on chemicals alone. “It’s a big deal. It is 6 to 7 percent on most everything, and the product you eventually sell is going to be taxed, so it’s really a double tax (without the exemption).”
Sen. Emanuel Jones, a Democrat from Ellenwood, would seem an unlikely GATE card recipient. He’s a car dealer who also owns a home and 23 acres in Henry County where he grows timber and, one day, hopes to raise animals. The tax break could help maintain his three tractors.
Jones said his vote wasn’t a conflict because, at the time, he didn’t need the exemption.
“If it came up again, I would recuse myself and I would encourage others to do the same,” he said.