Georgians will vote November 4th whether to permanently enshrine the state’s top income tax rate of 6 percent in the state’s constitution. The so-called “tax-cap” amendment sounds American as apple pie, right? No one looks forward to the day their income tax bill comes due and the prospect of capping the rate will understandably sound appealing at first. But Georgia voters who take a wary second-look at the proposal will see it for what it truly is: an attempt to keep taxes for the wealthiest Georgians low and to block future generations from meeting the needs of our rapidly growing state.
Some quick background: In the 2014 legislative session, Georgia lawmakers placed Senate Resolution 415 on the ballot for voters to decide in November. The ballot question asks “Shall the Constitution of Georgia be amended to prohibit the General Assembly from increasing the maximum state income tax rate?” If voters approve, Georgia’s top income tax rate will never surpass its current 6 percent, barring the unlikely removal of the cap in a future vote.
Here’s the problem. Income taxes are one of the main tools at hand for state lawmakers to meet the needs of taxpayers, and Georgia’s needs have exploded in recent decades. The state’s population more than doubled in the past half century, rising from 15th most in 1970 to 8th most today. If Georgia’s growth continues apace, it could break into the top five by the middle of this century. Georgia is no longer a small, sleepy, agricultural corner of the South. It is a complex modern economy that needs things like a qualified workforce, world-class transportation and adequate health infrastructure to compete.
Meeting those challenges requires public investments with an eye on the future, and those investments require tax revenue. Georgia’s current leadership is unwilling to confront that essential truth, choosing instead to further erode the state budget through new tax cuts and business tax breaks. The payoff? Georgia today is plagued by overcrowded classrooms, congested roads and one of the most underfunded health systems in the country. That trifecta scares away high-wage businesses and makes Georgia a less attractive place for workers, families and entrepreneurs to locate.
Future generations of Georgians might be willing to forge a better path. Twenty, fifty or a hundred years from now, state lawmakers might want to consider, say, adding a 7 percent top rate to fund universal pre-kindergarten or a modern transportation system. They might want to temporarily raise income taxes to confront some extraordinary need like a natural disaster or deep recession. If the amendment is approved, making those choices will be off the table.
That raises the second problem. Georgia will inevitably need a way to raise more revenue in the future, but capping the state’s income tax will shield the wealthiest Georgians from paying their fair share. Other sources of revenue, such as sales taxes and fees, fall disproportionately on low-wage and middle-class workers, whereas income taxes fall more on the wealthy. That means deemphasizing income taxes will likely raise taxes on most Georgia families long-term.
It could also worsen the growing gap between the wealthiest Georgians and regular working families. The share of Georgia’s yearly income taken home by the top 1 percent nearly doubled to 18.7 percent in 2007 from 9.5 percent in 1979. And evidence already suggests that rising inequality makes it harder for states to fund the people’s business, since the wealthy are often able to shield much of their income from taxes.
Georgia voters will soon make a pivotal choice. Voting to cap the state income tax might seem like a no brainer to many. But if voters gave it more thought, they’d realize capping Georgia’s income tax does nothing to clear a path to prosperity for Georgia businesses or families. Instead, it will put future generations in a financial straightjacket, unable to solve our most pressing problems. It is a shortsighted and unnecessary restriction that could haunt Georgia down the road.