With Georgia’s economy still lagging behind, state leaders are desperate for solutions. In recent years, some have called for repealing or significantly reducing the state’s income tax, arguing that shifting toward a “consumption tax” – in other words, the sales tax – would make Georgia more competitive. While lowering income taxes might sound like a good idea at first, it’s actually a bad roadmap for where Georgia needs to go. As described in GBPI’s new report, Georgia’s Income Tax: Essential for State’s Economy and Families, rolling back the state income tax is a poor strategy for addressing Georgia’s needs.
In fact, the Institute on Taxation and Economic Policy (ITEP) recently released a report that destroys the myth that states without incomes taxes outperform the states with high-income-tax rates. As ITEP’s Executive Director Matthew Gardner explained in a guest blog, the high-income-tax states generally had greater economic growth per person, smaller declines in median family income, and comparable unemployment rates which means their economies were stronger and residents earned more money.
In a recent op-ed, published in the Atlanta Journal-Constitution , GBPI Executive Director Alan Essig also discusses the negative impacts of not having a state income tax. Cutting or eliminating the tax will hurt families and businesses by eroding Georgia’s ability to invest in schools, transportation, safe communities and other ingredients of a strong economy. Hard-pressed Georgians would pay more of their income in other, less equitable taxes, and the state would have less reliable resources for public investment.
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. Before going down that dangerous road, Georgia legislators need to remember how significant the income tax is to creating jobs and preserving the economy. Specifically, the income tax:
- Enables state investments and high quality of life;
- Promotes tax equity;
- Protects the poorest Georgians;
- Values Georgia families;
- Avoids excessively high sales tax rates; and
- Ensures Georgia’s balanced revenue stream and protects its stellar bond rating.
If Georgia’s leaders want to strengthen the state’s prospects for the future, then they should ignore the latest fad of income-tax-cutting and instead pursue sensible, comprehensive tax reform. To regain its position as an economically vibrant state with a high standard of living, Georgia needs a balanced approach that protects the state’s balanced revenue stream, preserves middle class families, and generates the money to meet Georgia’s growing needs.