Op-ed: So-called fix is a proven failure (The Atlanta Journal-Constitution)

As posted in the Atlanta Journal-Constitution

Plans to eliminate or drastically cut personal income taxes and replace them with other levies are in vogue in several states. Georgia policy makers would do well to ignore the siren’s call.

Such a tax shift would do nothing to help the state’s economy. It would, in fact, hurt families and businesses by eroding Georgia’s ability to invest in schools, transportation, safe communities and other ingredients of a strong economy.

Moreover, hard-pressed Georgians would pay more of their income in other, less-equitable taxes, and the state would have less reliable resources for public needs. A strong case can be made to reform and modernize Georgia’s tax code, but dismantling the income tax should not be a part of the discussion.

The income tax has come under fire as policy makers seek ways to help create jobs and stimulate the economy, especially since the Great Recession and slow recovery have cost Georgia 340,000 jobs, an 8.2 percent decrease. With Georgia near the bottom nationwide in job creation and economic growth, some people are desperate for solutions.

Anti-tax activists contend lower income taxes are a tried-and-true way to unleash job growth. There’s only one problem: It isn’t true.

Cutting or eliminating state income taxes doesn’t create jobs any more than taking the gas out of the tank helps a car go faster.

In the Great Recession, the state that suffered the biggest percentage job loss was Nevada, which has no state income taxes. There, employment fell 13.6 percent between 2007 and 2011.

Florida, another no-income-tax state, lost more jobs after the start of the crisis than any other but California. For the first time since World War II, more people left Florida than moved there.

And in Texas, the oft-cited model for running a state without an income tax, job growth was lower than in “Taxachusetts” between 2008 and 2010.

This poor performance isn’t limited to a few cases.

During the first decade of the 2000s, all nine states with no personal income taxes grew more slowly than the nine with the highest income tax rates, according to a recent analysis by the Institute on Taxation and Economic Policy.

The high-income-tax states generally had greater economic growth per person as well as smaller declines in median family income. In other words, their economies were stronger. Residents earned more money.

Before going down a dangerous road, Georgia legislators need to remember how significant the income tax is to creating jobs and preserving the economy.

It provides the money to invest in quality schools, a quality health care system and a skilled workforce. All are more important than tax rates in attracting businesses. The income tax also ensures that Georgia has diverse and reliable ways to raise money, rather than being overly reliant on a single volatile source such as the sales tax.

The income tax is a key reason for Georgia’s AAA bond rating — the highest a state can have — which helps Georgia borrow at low interest rates to make long-term improvements, such as deepening Savannah’s harbor.

Dismantling the tax wouldn’t just make it impossible for Georgia to invest in the building blocks of a strong economy. It also would shift the cost of maintaining the public good to those least able to pay by increasing reliance on the sales tax, which is disproportionately paid by lower- and middle-income households.

Cutting or eliminating income taxes might sound good at first, but like a supposed short cut that turns out to be a lengthy detour, it’s a bad road map for where Georgia needs to go.

Alan Essig is executive director of the Georgia Budget & Policy Institute.