The tax committee in Georgia’s House of Representatives is set to consider a recommendation to change the state’s constitution to permanently cap Georgia’s top income tax rate. This is a bad idea. Whatever you think about income taxes, putting a tax cap in the state constitution could deliver several unintended consequences and would help push Georgia ‘s tax policy in the wrong direction.
Senate Resolution 415 proposes to permanently cap Georgia’s top income tax rate at its current level of 6 percent. Although it won’t affect Georgia’s finances now, the amendment could cause some noteworthy problems down the road. The drawbacks to the legislation are fully explained in the two-page fact sheet, “Tax Resolutions Could Put Lawmakers in a Bind.”
There are three big problems with SR 415. The amendment would:
Limit available options for future tax reform – Georgia lawmakers worked to modernize the state’s outdated tax system several times in recent years, but the need for reform remains. Whether it’s two, 10 or 50 years from now, future General Assemblies deserve to have all options available for funding the people’s business. A future legislature, for example, might want to raise the top income tax rate in order to cut the sales tax or reduce other levies and fees. Legislators today shouldn’t needlessly remove that option.
Jeopardize Georgia’s ability to make public investments, especially in emergencies – Georgia is a very low tax state by any measure, which helped deliver billions of dollars in cuts from education and other services the last few years. Enacting a tax cap creates an arbitrary hurdle for lawmakers who want to reverse these trends by raising new revenue to invest in Georgia’s future. The cap could prove especially troublesome during an emergency, such as a natural disaster or deep recession, when future lawmakers might need to consider raising the income tax rate for a while to pay for extraordinary needs.
Push Georgia toward more extreme changes – SR 415 is intended to be a symbolic first step toward a more drastic tax makeover that swaps Georgia’s income tax for a vastly expanded sales tax. But that’s the wrong path for Georgia, as the Georgia Budget and Policy Institute explains here and here. A similar tax shift enacted in North Carolina is projected to increase taxes for up to 80 percent of state residents and lead to at least $650 million in annual state spending cuts once fully implemented.
Passing SR 415 would do nothing that benefits Georgians today and could lead to negative consequences tomorrow. It’s a misguided measure that lawmakers should reject.