New Tax “Study” Committee May Not be Interested in Studying

A special new legislative study committee is spending this summer considering whether Georgia should embrace some radical tax reforms next year. But based on its first meeting in Atlanta this month, the committee’s purpose seems to be more of an echo chamber to justify a foregone conclusion than a forum for learning or debate.

Created in early 2013, the “Fair Tax Study Committee” of Georgia’s state Senate is charged with evaluating whether Georgia should scrap its current tax system in favor of a so-called “fair tax.” The panel is scheduled to report its findings to the full legislature in January.

The committee’s first meeting convened last week and I was there to observe. The hearing was little more than a rally for various anti-government activists and interest groups already supportive of radical tax revisions. No potential critics were invited to provide a counterpoint. Each of the speakers on hand tossed out breezy arguments about income tax cuts being a proven roadmap to boost the economy, spark job creation and prevent wealthy “job creators” from abandoning the state. None of those clichés are supported by the facts.

At some point, it might be a good idea for the study committee to open the floor to a wider range of voices. Because there’s a strong case to be made that enacting anything remotely resembling the so-called “fair tax” is a terrible idea for Georgia

The “fair tax” is a fringe proposal to abolish or drastically reduce state income taxes and replace them with a vastly expanded sales tax. More accurately known as a “tax shift,” these sorts of plans raise taxes on low- and middle-income families, harm businesses and communities and lead to drastic cuts in services that support a strong economy and quality of life.

Each of the speakers at last week’s presentation argued that Georgia should follow the example of states such as Kansas and North Carolina that have enacted or explored similar plans. Here’s why that is a bad idea:

• In North Carolina, recently enacted legislation will raise taxes on an estimated 80 percent of North Carolina families and lead to more than $600 million worth of annual cuts to education and other services. Those with average incomes of around $1 million will get a tax cut of nearly $10,000, while low- and middle-income families will pay higher tax rates on housing, electricity and other basic essentials.
  

• In Kansas, a massive tax cut passed by lawmakers in early 2012 will create an estimated $4.5 billion budget shortfall over six years, while also sharply raising taxes on most families. Two leading tax experts who typically have opposing views on fiscal policy recently agreed that the Kansas plan was the country’s “worst” tax reform effort of recent years.

• In Louisiana, Gov. Bobby Jindal’s proposal to swap income taxes for higher sales taxes would have raised taxes for an estimated 60 percent of Louisiana taxpayers and increased the yearly tax bill for in-state businesses by $500 million. He ditched the plan after polling revealed widespread public opposition.

There’s a real risk of similar plans becoming law in Georgia, and you can be assured our voice will be part of the debate. Stay tuned during the coming months as GBPI provides research, analysis and perspective on this emerging issue.