With time running out, legislative leaders hoping to pass some form of state tax reform are pushing hard amid worries from some that the plan could hurt middle-class Georgians.
Members of the Joint Committee on Georgia Revenue Structure met briefly Monday to go over a slimmed-down version of a plan lawmakers have chewed over for nearly three months. The bill, HB 387, would lower the individual income tax rate from 6 percent to 4.5 percent but eliminate many common deductions.
While supporters promoted the bill as a 25 percent cut in the tax rate, Republican members of the committee said few will see much of a change in their overall tax bill. Republican lawmakers who crafted the legislation were confident it will lure growth to the state, however.
“It will be a jobs creator at a time when we need jobs in this state,” said House Ways and Means Chairman Mickey Channell, who is co-chair of the joint committee.
Apart from the income tax change, the bill also would institute a 7 percent communications tax that would take the place of a patchwork of local franchise fees and other taxes on cable television and telecommunications and broaden the tax to include currently tax-free services such as satellite television and Internet-based phone service.
It also would charge sales tax on auto repair services and the private sales of cars, boats and planes.
The plan includes some features popular with industry, including a tax exemption on energy costs for manufacturers and revamped agricultural exemptions.
House Minority Leader Stacey Abrams, D-Atlanta, who is a tax attorney, said she is reviewing the 68-page bill to see how it will affect middle-class families. Right now, she is reserving judgment, she said.
“This is not a tax cut. It is a tax shift. We are shifting taxes from income to services,” she said. “Somebody is going to be paying for the shift."
If that somebody is the middle class, Abrams said she would have "grave concerns.”
The Special Council on Tax Reform and Fairness worked much of last year on a broad set of tax reform recommendations, most of which the committee decided against including in the bill.
The plan now keeps the sales tax exemptions on groceries, haircuts, country club dues and a host of other goods and services Georgians currently get tax-free.
“The tax council suggested [taxing] everything, but that just didn’t pass the political filter,” said Channell, R-Greensboro.
Channell said the plan is a first step away from an antiquated system that taxes “buggy whips.”
“This is more for the long term,” he said. “The more you get to the point of taxing consumption and not wealth, and you broaden the base and lower the rate, the better off the state is going to be.”
The committee could meet again to vote on the plan as soon as Tuesday.
If it should pass a committee vote, it would move directly to the House for a full vote. After that, the Senate would get a chance, but Senate rules require the legislation to be "read" on the floor for three consecutive legislative days.
The 40-day session is winding down. At this pace, the earliest the bill could reach the Senate for a vote would be Friday, the 38th day.
Senate Majority Leader Chip Rogers, R-Woodstock, said Senate Republicans met for hours Monday discussing the plan, but he said he took no polls to gauge support.
"I think people are getting more comfortable with it," he said.
Many were waiting to see the actual bill, which even members of the joint committee did not get until moments before Monday's meeting. Sen. Frank Ginn, R-Danielsville, called the plan "the mystery in the box."
"All we have heard is generalities," he said. "I'm sure there are good things in it and bad things in it."
Overall the plan is expected to make little impact on how much in total tax the state collects. Estimates generated by the Georgia State University Fiscal Research Center put the impact between a loss of $7.2 million and a gain of $10.8 million.
Total tax collections by the state from all sources for fiscal 2012 are estimated at $16 billion, so Channell said the plan is “as close as you can get to revenue neutral.”
The cut to the income tax rate is expected to generate between $214 million and $232 million less in revenue to the state, or about 3 percent less than the approximately $8 billion in individual income taxes collected each year.
The one service the committee has selected to tax is auto repair, which would deliver an estimated $45.6 million to the state in new taxes. Steve Garrison Jr., owner of Canton Tire and Wheel, was shocked his industry was the sole service targeted for a new tax.
“I can’t understand singling out the automotive industry. You are not going to do that to plumbers, homebuilders, anybody else providing services along those lines,” he said.
Garrison, who has been in business for 25 years, is deeply suspicious of the entire package. Legislative backers say the tax plan will not mean additional revenue for the state, although individual families may pay more or less.
“When it is all done at the end of the day, if they are going to collect no more tax ... why are you even bothering with it?" he said. "I can assure you they are trying to figure out a way to take in more money.”
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