YES: Taxing goods but not services is unfair, and could be a detriment to the state.
By Sarah Beth Gehl
In 1951, if you asked someone if he ever downloaded music, he wouldn’t know what you were talking about — and neither would you. When Georgia’s sales tax system began, folks played music on records; no one could have fathomed the idea of downloads.
A lot has changed in the past 60 years, but our sales tax system isn’t one of them. And the failure of the sales tax to keep up with the new economy has severe implications for meeting our state’s needs.
Back then, families spent more on products than on services. Today, it’s the other way around. Failing to modernize the sales tax to reflect the spending habits of today means we’d have to raise the tax rate to avoid losing the revenue from transactions that switch to services. Either that or not have the resources to meet the needs of a changing, growing state.
Georgia’s outdated sales tax system has another shortcoming: It’s biased against those who still choose some products over services because they cost less. For example, the family that buys a mouse trap pays taxes, while the family that hires pest control services does not. A Georgian washing her own clothing pays tax on the laundry detergent, but the Georgian using a dry cleaning service does not.
To help bring our tax system into the modern economy, the Special Council on Tax Reform and Fairness for Georgians sensibly recommended taxing such services as pet grooming, dry cleaning and digital downloads but not adding taxes to medical, legal, and educational services, or business-to-business services.
In essence, they would extend the sales tax only to those services that in our day-to-day life replace tangible goods.
Some recent media coverage of this proposal has made it sound as though taxing services is a new concept for Georgia. It’s not. Today, Georgia taxes 36 out of 168 possible services, identified by the Federation of Tax Administrators. Taxed services in Georgia include tire repair and photocopying, among numerous others.
So while we can debate which services should be taxed and which shouldn’t, it’s not a debate about “should we tax services?” That’s already been decided.
Nor would Georgia be blazing a new path with these particular services. Those recommended by the council to be covered are already taxed in many surrounding states. And while some will argue that sales tax collection is a hardship for businesses, in Georgia they are more generously compensated for their troubles than in most states. Georgia is one of 28 states that let businesses keep a portion of the sales taxes they collect and one of only 13 that place no limit on this compensation.
With the legislative session nearing an end, lawmakers have only a few weeks left to make improvements in Georgia’s sales tax that will match it with today’s economy instead of the transactions of the 1950s.
Paying a little extra at the dry cleaners or to have Fido bathed to make sure the sales tax rate stays where it is and to ensure we can provide such necessities as schools, public safety, health care and good roads is sound policy and a good investment.
Sarah Beth Gehl is deputy director of the Georgia Budget & Policy Institute.
NO: Service taxes will fall hard on the elderly, poor and middle class.
By Pedro Marin
The recommendations of a special commission on tax reform, now under consideration by the House of Representatives in the form of HB 385, contain many radical changes to Georgia’s tax structure. These include imposing new sales taxes on groceries, sales of automobiles from one individual to another and 50 personal services not currently taxed — covering a broad range of everyday needs, such as public transportation, haircuts, dry cleaning, automobile repair and family pet care.
Placing an additional tax on daily necessities would disproportionately hurt Georgians who are least able to afford it: middle-class working families, the unemployed, the elderly and others at the lower end of the income scale. These residents are having a hard enough time avoiding home foreclosure, buying prescribed medication and keeping food on the table without having more money taken out of their wallets by the state during a time of economic distress.
If increasing the costs for food and personal services is not enough, HB 385 also would slap a new tax on Sam’s Club, Costco and AAA memberships — services that help Georgians save money on shopping and emergency roadside assistance. Medical patients would begin paying sales tax on prescribed items including diabetic care supplies, oxygen and prosthetic devices.
Because they hit those who are nearest the edge of financial disaster the hardest, these proposed tax increases could contribute to forcing many individuals and families into welfare, rather than the intended purpose of bringing in more revenue to balance the annual state budget.
HB 385 also includes a provision that would eliminate the current sales tax exemption on nonprofit charity fundraisers in our state, penalizing some 24,000 organizations. These organizations, many of which are faith-based, are largely made up of volunteers who are simply trying to help others in their communities. I cannot believe serious consideration is being given to taxing these efforts and, ultimately, those who would be helped.
Also specifically included in the tax bill are popular, time-honored American traditions of Girl Scout cookie sales and Boy Scout popcorn sales. As someone who has served for many years as a scout leader with the Atlanta Area Council and executive board member of the Northeast Georgia Council of Boy Scouts of America, I can attest that requiring our scouts to collect sales tax is neither feasible nor fair.
It is no exaggeration to say the overall economic impact of this new tax on Georgia’s scouting councils would be in the hundreds of thousands of dollars each year, thus denying leadership, camping and community service programs for many young people, especially those in rural or financially distressed areas. I will be working with my House colleagues, hopefully in a bipartisan effort, to protect scouting activities from the implementation of any new sales tax.
I do not believe further shifting the tax burden to middle- and lower-income Georgians, as well as those who serve in and are served by community organizations was what the legislative majority had in mind when it created the special commission on tax reform and “fairness.” I urge the legislative leadership to consider the negative impact of placing extra financial burdens on our residents and refrain from enacting new sales taxes on the essential items and services that meet Georgians’ everyday needs.
State Rep. Pedro “Pete” Marin, D-Duluth, represents District 96 in the Georgia House of Representatives.
