Tax overhaul pushed to ’12 as distrust lingers

Legislative staffers are busy this summer poring over mounds of new data in an effort to restart an overhaul of the state’s tax system that ended in disaster earlier this year.

But a lingering distrust of the process leading to the collapse of the plan means such an overhaul is likely off the agenda for a special redistricting session slated for August.

“The ambitious side of me would say anything is possible,” said Georgia House Majority Leader Larry O’Neal, R-Bonaire. “But at this point I’m not that ambitious.”

House Speaker David Ralston, R-Blue Ridge, also said a tax overhaul will not be part of the special session in August, but “we will be ready by January.”

That’s disappointing to Kelly McCutchen, president of the conservative-leaning Georgia Public Policy Foundation, which supported the GOP-led effort to shift the state’s tax system away from income taxes and toward consumption and sales taxes.

“From an economic perspective, we would certainly hope they could come to some sort of agreement on tax reform,” he said, “and the sooner you can do it the sooner it can jump-start our economy.”

But McCutchen said it is important lawmakers get comfortable with the process and first agree on the goals of an overhaul.

“They are going to have to do a lot of education and explaining what the impacts are on different Georgians,” he said.

A plan to overhaul the tax system was unveiled in January with high hopes, but it fell to pieces in the final days of the session in April amid squabbling and deep distrust between the House and Senate, Democrats and Republicans, and Republicans themselves. It faced outside pressure, too, as groups from across the political and economic spectrum worried they would end up paying more in taxes.

The plan began its slow-motion crumble when House Minority Leader Stacey Abrams, D-Atlanta, used data provided by the Georgia State University Fiscal Research Center to show it would increase taxes on middle-income Georgians while giving large tax cuts to the rich.

Abrams’ discovery sent Republican leaders into a series of closed-door meetings in an attempt to fix the problems. But it also fostered a deep suspicion among many lawmakers of the GSU center, which provided the data for the tax plan as well as the fiscal analysis of other bills. Many felt uneasy that projections and the underlying tax data used dated to 2005. (The Fiscal Research Center had attempted to get access to more contemporary tax records but had been blocked by the Georgia Secretary of State’s Office over privacy concerns. This year, the General Assembly passed a bill allowing access to raw tax data through 2009.)

Frustration mounted as legislators were presented with a constantly shifting series of possible outcomes for Georgia taxpayers. Ultimately, Ralston pulled the plug on the overhaul, pointing a finger at the GSU analysis.

O’Neal said researchers now have access to more recent tax data, and he has suggested using other universities along with GSU to better gauge the impact of proposed tax changes.

Abrams said Georgia State was made the scapegoat for a flawed political process. There was nothing wrong with the data, she said, Republican lawmakers just kept asking different questions in an attempt to keep the plan afloat.

“Economists and mathematicians are not magicians,” she said. Nevertheless, Abrams supported putting the effort off until 2012 and welcomed a chance to work with Republicans to modernize the state’s tax structure.

O’Neal’s desire to get a second — or third — opinion is shared by a great number of Republican lawmakers in both chambers who left the regular session exhausted and troubled.

Sen. Lindsey Tippins, R-Marietta, said estimates of what the tax changes would mean to families and businesses changed so frequently that the plan’s effects seemed like “not much more than a guess.” He said he would need a greater degree of certainty before he could support a tax overhaul.

“I’d rather have two or three people doing the analysis,” he said.

GSU officials, dependent on the lawmakers for their funding, regard the controversy in the General Assembly with caution.

“The Fiscal Research Center welcomes suggestions and input, and would be happy to collaborate with other researchers,” Tom Lewis, a senior adviser to GSU President Mark Becker, said in a statement. “We always strive to fill requests and provide the most accurate data possible.”

If legislative leaders want to make a change, the time is right. Georgia State’s two contracts with the General Assembly are up for renewal at the end of June, and both are surprisingly low-cost deals that could allow lawmakers to bring in some additional voices.

The Fiscal Research Center has a $217,056 annual contract to provide various financial reports and briefings to state officials and a $90,000 contract to provide fiscal notes for legislation, including the tax overhaul bill. The state Board of Regents supplements the center with an additional $414,956 from its budget to cover operating costs.

The contract is let through the Governor’s Office of Planning and Budget. The agency’s director, Debbie Dlugolenski, said she is “exploring options” to see whether any of the state’s other universities can assist with the work.

Regardless of which university prepares the analysis, many lawmakers will be looking for a plan that results in a lower tax bill for almost every Georgian. That’s a tough benchmark, but Sen. Judson Hill, R-Marietta, said lowering the tax burden should be the goal.

“I want a win for the people and the state of Georgia,” he said, “and I want to be confident that it will be the result and not [just] hopeful.”

Staff writer Aaron Gould Sheinin contributed to this article.