And so the Noble Experiment to rewrite Georgia’s tax code in a politics-free climate has been deflated into a routine bit of score-settling among lobbyists, a tax break for businesses and a slight decrease in the personal income tax rate.
Signed into law by Gov. Sonny Perdue last year, the effort was modeled after federal legislation used to close U.S. military bases. The recipe looked so good on paper: First, take a blue-ribbon panel of business and tax experts, and ask them to come up with a flatter, more reliable form of taxation that encourages growth.
Then demand that the recommendation of this disinterested panel be placed, in its entirety, in a bill offered up to the Legislature. Allow a joint House-Senate committee to make a few absolutely necessary adjustments — and then send the package to both chambers for an up-or-down vote.
Voila! Two-hundred-and-thirty-six lawmakers are handed a politics-free, eat-your-spinach moment to savor and enjoy. But any cook will tell you that a spinach soufflé is a delicate thing.
The first thing that went wrong for the Noble Experiment was November. Experts predicted the month would come right after October. Darned if they weren’t right.
November delivered up a new governor with roots in Washington, who had played no part in the creation of the Noble Experiment. Nor did Nathan Deal appreciate being handed a factory-assembled tax-reform package set in motion by his predecessor.
Moreover, Deal had just finished a hard-fought campaign, the centerpiece of which was a 2 percent decrease in the corporate income tax.
The new governor congratulated members of the tax panel for their work — and said he didn’t think much of their idea of restoring the 4 percent state sales tax on groceries.
There is a strong case for the tax panel’s recommendation. Georgia’s tax code is a Swiss cheese of exemptions won by persistent and generous lobbyists. Property taxes, traditionally the funding source for local governments and schools, have been stretched to the limit.
The panel recommended an end to most sales tax exemptions. It also recommended broadening the reach of the sales tax and would have applied it for the first time to services such as haircuts and pedicures. In return, corporate and personal income taxes were to be gradually reduced.
Here’s another place where the Noble Experiment failed. We hate it, we mock it, but taxation as we currently experience is at least predictable. A consumption tax may be ideal, but it’s a devil we don’t know. And it never had a champion in the Capitol.
When House Ways and Means Chairman Mickey Chanell, R-Greensboro, unveiled the new face of tax reform on Thursday, he first explained that legislators hadn’t really been serious about a wholesale shift to the sales tax.
“Part of what we had to do is introduce a bill that contained all the tax council’s recommendation,” Channell said. “We have done that. As a result of that, frankly, we heard from the folks back home on some matters.” Channell emphasized what the new version of the legislation wouldn’t do.
“We’re not going to tax Girl Scout cookies,” he said. “We aren’t going to tax groceries. We aren’t going to tax veterinary services. We’re not going to tax haircuts, legal services, AAA memberships, Sam’s Club [and] Costco memberships, dry cleaning, pedicures, prescriptions, cigarettes, and we’re not going to eliminate the exemptions on Georgia’s nonprofit organizations.”
What the legislation now does is settle two long-standing feuds in the state Capitol. Automobile dealers have long argued that casual car sales should be subject to the same sales tax their customers pay.
Cable TV and land-line phone companies have likewise been miffed that satellite TV and cell phone companies escape a sales tax for their services. Both wrongs are righted in the new measure.
Personal income tax rates would drop from 6 percent to the neighborhood of 4.5 percent. A move to raise the income tax exemption for Georgia retirees from $35,000 to $100,000 has been postponed indefinitely. The revision includes no reduction of the corporate income tax, as advocated by Deal.
House Speaker David Ralston on Saturday said the revised version of tax reform — he called the blue-ribbon panel’s work “historic” — is more important than it might appear. Businesses will benefit from an energy tax exemption. Small-town banks will file under that reduced income tax rate, Ralston said — creating more cash for local investment. “This is a really big deal,” he said.
As for the blue-ribbon panel’s recommendation that the sales tax be extended beyond purchased goods, the only new service provider who would be honored with a levy on his labor is the auto mechanic.
But Ralston said this small extension will test GOP commitment to an extended sales tax. “Now we’re about to find out if we’re serious,” he said.
Senate Republicans postponed public comments about the results of the Noble Experiment until next week. Democrats were less reticent, and unimpressed.
“They indicated they were going to change the engine,” said state Sen. Doug Stoner of Smyrna. “I don’t know that they even changed the oil.”
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