Income Tax Cap Resolution a Low Point for 2014 Legislature

A reckless constitutional amendment designed to tie the hands of future lawmakers and hamstring the state’s ability to meet its growing needs over time stands out as the worst tax legislation passed by the 2014 Georgia General Assembly.

Senate Resolution 415 places a constitutional amendment on this November’s ballot asking whether Georgia’s income tax should be permanently capped at of 6 percent. The amendment threatens permanent damage to Georgia, even though the peril may not be obvious to voters this fall.

Forever capping Georgia’s state income tax takes away one of the options future lawmakers could use to meeting the mounting needs of our growing state. Georgia’s population more than doubled in the past half-century and its economy is one of the largest among the states. It 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 in the 21st century.

But Georgia today is plagued by overcrowded classrooms, congested roads and one of the most underfunded health systems in the country. That scares away high-wage businesses and makes Georgia a less attractive place for workers, families and entrepreneurs to locate. Additional tax revenues over time are needed to get Georgia back on the right track so state and local lawmakers can strengthen investments in our most critical public challenges.

Lawmakers could enhance Georgia revenues in a number of responsible ways, such as closing loopholes for big business or enacting modest and targeted tax increases, like higher fees on cigarettes. Putting an ill-considered constitutional cap on Georgia’s income tax takes one of those tools out of the toolbox, forever. Such shortsightedness could haunt Georgia in the future.

The move could also put Georgia on a path toward even more dangerous changes in the next few years. Supporters of the tax cap resolution made it clear: capping the state income tax is only a first step toward deeply cutting or eliminating income taxes altogether and replacing lost revenue with a super-sized sales tax. But that sort of “tax shift” approach is the opposite of what Georgia needs. It would likely raise taxes on most families, lead to big cuts in education and other services and do little or nothing to help our state’s economy.

Beyond the tax cap amendment, the rest of Georgia’s 2014 tax legislation will reduce future state and local revenues, which has been the norm in recent years. Legislators in 2014 extended some unproven business tax breaks, approved some election year tax gimmicks and made some other minor revisions around the edges. While not as expensive as in past years, these bills create another drain on the treasury for state and local lawmakers still struggling to recover from years of cuts to schools, hospitals and other services. These are more fully detailed in our new report, “Adding Up the Fiscal Notes: Tax Measures Further Whittle Away Revenues.”

Georgia lawmakers in 2014 at least deserve some credit for refraining from the kind of radical tax shift agendas that are currently in vogue in states like Kansas or North Carolina. They should continue to resist that siren’s call next year. Still, this year’s tax policy agenda does little to clear a path to prosperity for Georgia’s economy and families. The tax cap in particular will inflict lasting damage. Until lawmakers are willing to embrace a more balanced approach to tax policy that includes new revenues and new investment, Georgia will continue to fall short of its true potential.

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