New council could make big changes in taxes

A new panel looking at Georgia taxes begins work Wednesday with everything on the table.

And that means everything -- from eliminating loopholes and restoring a 4 percent sales tax on all groceries to adding new levies on services from haircuts to auto repairs and giving businesses incentives to hire.

While political leaders say they want the committee to modernize -- not raise -- taxes, the Special Council on Tax Reform and Fairness will be the most heavily lobbied group around. Every business and industry in the state will want to either make sure its current exemptions are kept on the books or try to get new tax breaks.

The group’s final recommendations will go to the General Assembly, which will vote them up or down when they return for the 2011 legislative session in January.

In addition to discussing what taxes people pay and how they pay them, the committee also is likely to consider offsetting increases by cutting personal and/or corporate income taxes.

It could recommend eliminating some special-interest sales tax exemptions, as many candidates for governor had called for this year. And it could seek to add new tax breaks in hopes of giving businesses more incentives to hire workers.

Any changes are bound to be highly controversial.

Diane Bryant, a social worker from Atlanta, was cool to the idea of charging a state sales tax on all groceries.

"That is a quandary because there are an awful lot of people who can't pay for food as it is," she said. "I would be more inclined to go after the bigger folks."

Bryant said the state needs a tax system that pays for the services Georgians need, such as roads and schools. She's concerned about government cutbacks in recent years.

"Taxes are important to me, but it's not as important as righting the ship," she said. "We've got to figure out how to pay for this stuff."

Jim Metcalfe of Bremen, a high-rise building engineer in Atlanta, supports a flat income tax -- everyone pays the same percentage of their income. He doesn't want to see the state raise taxes just to spend more money.

"There should be a limit to how much the politicians can spend," he said. "I'm a big proponent of spending controls at the state level. I don't think we'd be in this situation if they'd kept themselves in control between 2000 and 2007. The rate of spending was just incredible, and we're all paying for it now."

Legislators have long complained that the tax code -- which includes hundreds of exemptions for special interests -- was written decades ago for an economy that relied heavily on agriculture and manufacturing. Those remain important sectors of the economy, but Georgia also has seen huge growth in service industries.

Several gubernatorial candidates have called for the state to look at the sales tax exemptions on everything from sod and church bells to crab bait and aircraft parts to figure out which ones should stay in place.

Lawmakers have talked of removing the exemption on all groceries and broadening the sales tax to include more goods and services. Some Republican leaders say the extra money raised would let them cut personal and corporate income taxes, which in turn would help Georgia better compete with states like Florida that don't have a personal income tax.

House Speaker David Ralston (R-Blue Ridge) said he doesn't want to prejudge the council and say specifically what tax changes are needed. But the long-term view, he said, is to create a more modern tax system that helps create more jobs. And whatever is passed, he said, shouldn't increase taxes overall.

"The ultimate goal is to make job creation and job maintenance a priority in this state," he said.

The makeup of the group has raised some concerns. State Rep. Stacey Abrams (D-Atlanta), a member of the committee that approved the creation of the council, said it lacks both racial diversity and consumer interests.

The legislation creating the council named four economists, representatives of two business lobbying organizations, Gov. Sonny Perdue and two appointees each from Ralston and Lt. Gov. Casey Cagle to serve on the council.

Abrams called taxes a "zero sum" game, so that if one group gets a tax break, others have to pay more.

"What we often do in the Legislature is focus singularly on the business climate without focusing on the consumers who make the businesses work," Abrams said. "It doesn't matter if you have a good business climate if you don't have anyone who can afford to buy the products."

Ralston said the council is made up of people who have a track record of knowing how to create jobs. And with unemployment above 10 percent in Atlanta, tax policies that create jobs are vital, he said.

"These are big-picture people. They are going to take a big-picture view of things," Ralston said. "I don't know how anyone can quarrel with the idea that if we create a climate where it is good to do business in Georgia, that's good for everybody."

Sarah Beth Gehl, tax policy expert at the Georgia Budget and Policy Institute think tank, said the effect of the tax system on economic development should be only one of the areas studied by the council.

"Hopefully the council members will consider the tax system from all perspectives, including how it affects low- and moderate-income Georgians and its effect on funding for essential services," she said. "This shouldn't be an exercise in who can protect their special-interest tax break or carve out a new one."

Who gets tax exemptions, and who gets to keep the ones that are already on the books, will be part of the discussion and will guarantee full employment for Statehouse lobbyists.

For some on the council, tax breaks for businesses aren’t a theoretical debate. One of the council members, D.E. "Skeeter" McCorkle, president of McCorkle Nurseries, is in a business that has received tax breaks from lawmakers in the past 20 years.

Agriculture exemptions, which have piled up the past two decades, are among those that will be looked at by the council.

One of the people who will keep a close eye on the council is former longtime state Rep. Richard Royal, the author of many of those exemptions. He is lobbying for many of the top agriculture interests, as well as cities, counties, school boards and the mining industry.

Royal said of the exemptions, "I don't ever remember passing one that wasn't justified at the time."

Special Council on Tax Reform and Fairness

Wednesday's 1 p.m. meeting at the Sloppy Floyd Building across from the Capitol is open to the public. Here's a list of the council members:

• Gov. Sonny Perdue

• Suzanne Sitherwood: President, Atlanta Gas Light; chairwoman of the Georgia Chamber of Commerce

• Gerry Harkins: Former president, Southern Pan Services, a construction company; Georgia chairman of the National Federation of Independent Business

• D.E. "Skeeter" McCorkle (appointed by Lt. Gov. Casey Cagle): President and CEO, McCorkle Nurseries Inc.

• Bradford Dickson (appointed by Cagle): Manages and coordinates tax practice at Tarpley and Underwood, P.C., certified public accountants

• Roy Fickling (appointed by House Speaker David Ralston): President, Fickling & Company, a real estate development, management and consulting firm

• A.D. Frazier (appointed by Ralston): Partner, Affiance, LLC, a bank consulting firm; previously chief operating officer of the Atlanta Committee for the Olympic Games

• Roger Tutterow: Economics professor, Mercer University

• David Sjoquist: Director, Fiscal Research Center, Andrew Young School of Policy Studies, Georgia State University