Haircuts, groceries and Girl Scout cookies appear to have escaped the tax man, as Republican legislators near completion on a tax reform bill many considered dead weeks ago.
Lawmakers on a special committee are close to turning a massive restructuring of the state tax code into a bill that could be unveiled Monday, House Ways and Means Chairman Mickey Channell said Thursday.
The plan lowers the personal income tax rate from 6 percent to 4.5 percent, said Channell, R-Greensboro. He pointed to a lower income tax rate as a way to make Georgia more competitive for jobs, but House Majority Leader Larry O’Neal, R-Bonaire, noted that many people will end up paying essentially the same in income taxes.
“The tax burden is not cut. The tax rate is cut,” he said. “We’re able to reduce most of the rate by the abolition of itemized deductions.”
The plan rejected some of a citizen-led tax council’s recommendations — deciding against a tax on groceries and a higher tax on cigarettes — but Channell said it would, among other things:
- Tax a broader array of communication services.
- Keep but freeze the retiree income tax exemption (another area of disagreement with the panel).
- Cut energy taxes for business.
If the current Legislature were to pass a bill, many of the changes would happen quickly, including a reduction in the income tax rate.
As Channell described the plan as a “jobs bill” that would help Georgia, Democrats on the committee complained they were not included in developing the plan, which GOP leaders have hashed out in secret talks with lobbyists over a period of weeks.
“Lowering the income tax rate means jobs for Georgians. Our current income tax rate simply is not competitive,” Channell said.
Tennessee and Florida do not have a personal income tax, and Alabama’s rate is 5 percent.
“This proposed reduction in income tax rate on income tax will make us instantly more competitive to recruit the high-paying jobs our citizens need,” he said.
Revenue figures were not released Thursday, but Channell and O’Neal, among others, said the plan would not mean a net tax hike.
Sen. Steve Thompson, D-Marietta, who was appointed as the Democratic representative from the Senate to the committee, said he only received notice of the meeting earlier in the day.
“I haven’t ever been involved in the conversations with another member of this committee,” he said. Thompson left the meeting early, sardonically saying he hoped it would not “bring the proceedings to a startling halt.”
House Minority Leader Stacey Abrams, D-Atlanta, said she had seen “summary numbers” but no details.
“It’s not going to stop me from giving it careful consideration,” she said. But, she added, “I was appointed to the committee. My assumption was that I would be included.”
While many taxpayers may not see a change in their tax bill, O’Neal said the lower rate helps market the state to business.
“Right now we are the highest tax rate in the Southeast. That keeps executives from wanting to move their business to Georgia,” he said. “It impacts Georgia’s marketability. I don’t deny that for a second.”
The committee’s work stems from recommendations by the Special Council on Tax Reform and Fairness, which studied the state’s tax code for much of last year before releasing a sweeping reform plan in January. The tax council’s plan included applying state sales taxes to groceries and a long list of consumer services, as well as eliminating dozens of tax credits and exemptions.
The plan upset a wide range of groups from across the political spectrum. Veterinarians, barbers and the Girl Scouts clamored to keep their goods and services exempt from sales tax, while rank-and-file legislators worried about the potential fallout from approving taxes on groceries or an increased cigarette tax.
The committee’s plan left most of those suggestions on the table. “Frankly we’ve heard from some folks back home on some matters,” Channell said.
Leaving off plans for a grocery tax makes the bill much more palatable for many in the Legislature. That and other aspects of the plan had many lawmakers believing tax reform was dead for the year.
The end to the proposed grocery tax was greeted warmly by some advocates for the poor. The elimination of a proposed cigarette tax increase from 37 cents to 68 cents per pack was less warmly received from health organizations.
However, the committee left open the possibility that lawmakers could take some of the tax council’s recommendations back up next year.
“This will not be the last initiative,” said O’Neal, who called the proposal an “interim step.”
The plan does include new taxes on auto repair services, satellite television, and private sales of cars, boats and planes. It also freezes an exemption on taxes on retirement income at $35,000.
Bill Tomlinson, retired state budget director, called it a good compromise.
“Most retirees are happy with what they’ve got now,” he said.
The proposal does not lower the corporate income tax rate, something Gov. Nathan Deal campaigned on last year. Spokesman Brian Robinson praised the committee’s work but indicated that the matter is not settled.
“We have some important work to do with the Legislature, but we’re happy with the direction we’re going,” he said.
When the tax council’s proposals were released in January, chairman A.D. Frazier urged lawmakers not to cherry-pick the most attractive pieces but to accept the plan as a package. On Thursday, Frazier took a more conciliatory tone, saying he thought the lawmakers were doing the best they can.
“We gave them a robust set of recommendations, and these guys have to deal with the politics. That’s why we pay them,” he said. “This is tough sledding. Taxes are just an incredibly tough issue for these folks. I understand that.”
Staff writers James Salzer and Aaron Gould Sheinin contributed to this article.
TAX PLANS: ORIGINAL VS. NEW
Original plan: Start charging the state's 4 percent sales tax on all groceries.
New plan: Keep most groceries exempt from the state sales tax.
Original plan: Lower personal income taxes from a high of 6 percent to 4 percent, cutting or eliminating deductions.
New plan: Lower personal income taxes from 6 percent to at least 4 1/2 percent, cutting or eliminating deductions.
Original plan: Eliminate state tax exemption for retirees on non-work income such as pensions and investments.
New plan: Keep current exemption, eliminate planned expansion of the tax break set to begin being phased in next year.
Original plan: Charge a sales tax on person-to-person sales of motor vehicles.
New plan: Charge a sales tax on person-to-person sales of motor vehicles, with the exception of sales between family members.
Original plan: Lower corporate income taxes.
New plan: Keep current corporate income taxes.
Original plan: Increase state cigarette taxes from 37 cents to 68 cents per pack.
New plan: No change in current tax.
Original plan: Exempt energy used in manufacturing from the state sales tax.
New plan: Provide similar exemption for energy use in manufacturing from the state sales tax.
Original plan: Charge the state sales tax on a host of goods and services.
New plan: Charge the sales tax on labor involved in auto repair.
Original plan: Charge a 7 percent excise tax on telecommunications, such as satellite TV service.
New plan: Charge a 7 percent excise tax on telecommunications, such as satellite TV service.
-- Compiled by James Salzer
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