In a surprise move the Joint Special Committee on Tax Reform unveiled its proposed tax reform package yesterday with only seven days left in the current session of the General Assembly. According to the Atlanta Business Chronicle, the proposal is made up of eleven provisions, all of which have been attempted unsuccessfully in the past.
The tax reform bill, officially called H.B. 386, would make the following changes to Georgia tax law:
- Phase out the sales tax on energy.
- Replace the ad valorem and sales taxes on cars. The “birthday tax” would be replaced with a one-time title fee on cars that would capped at seven percent.
- Eliminate the sales tax exemption on film production in Georgia. A separate tax credit for film production would remain.
- Restore the sales tax holiday for school supplies and energy-efficient appliances.
- Reduce conservation tax credits property owners.
- Cap the exemption for non-wage income earned by retirees at $65,000 per year for individuals and $130,000 for couples. Income taxes would be paid on non-wage income above these amounts.
- Authorize the collection of sales taxes for online purchases from retailers like Amazon.com.
- Reduce Georgia’s “marriage penalty” by increasing the exemptions for married couples filing jointly from $5,400 to $7,400 and from $2,700 to $3,700 for couples filing singly.
- Extend on a break in the sales tax on purchases of jet fuel.
- Revise sales tax exemptions on farm equipment purchases.
- Create a discretionary fund to be used by the governor to offer tax incentives to out-of-state companies who relocate to Georgia.
The ABC quotes Senator Chip Rogers (R-Woodstock), the majority leader, as saying, “This is a tax cut. [It] reduces taxes on Georgia taxpayers.”
While the original intent of the committee was to create a “revenue neutral” reform proposal, the bill in its current form would reduce tax revenues by $53 million according to a Georgia State University analysis cited on AJC.com. The reduction represents just under 2.5 percent of Georgia’s 2012 budget.
Proponents of the bill believe that the reform would help to spur growth and investment in Georgia. Since the onset of the Great Recession in 2008, Georgia’s unemployment has been consistently above the national average. Georgia’s real estate market has also been one of the hardest hit and the foreclosure rate remains among the nation’s highest.
In theory, the tax reform would attract new business to the state, which would create jobs and reduce unemployment. The foreclosure rate would then decrease and property values would stabilize as Georgians find new jobs and new workers come to the state.
Opponents of the measure question how the state would pay for the $53 million in tax cuts. The state budget has been the subject of painful cuts in recent years amid lost tax revenue during the recession. Others complain that the bill does not do enough to reduce the state’s tax burden and instead merely shuffles the taxes from one group to another.
Tax reform was also proposed last year. The 2011 reform bill died in the house amid complaints that it raised taxes. The last-minute introduction of the 2012 reform bill may have been intended to not give opponents time to rally against the current legislation.