Senate opts for income tax cuts

ATLANTA — State Senate leaders announced their own tax relief plan Tuesday, claiming a reduction in state income tax will help Georgians more and sooner than the House proposal to end the property tax on cars.

The Senate’s measure would reduce income tax by 10 percent for all income brackets over the next five years.

The plan would start with a $200 million cut in fiscal year 2009, and would result in annual tax reductions of about $1.2 billion by the time the income tax cut was fully implemented in fiscal year 2013.

“Tax reform needs to be broad-based, fair and immediate,” Lt. Gov. Casey Cagle said in announcing the plan Tuesday.

“We do need a stimulus plan,” he said about the sluggish economy, and noted the income tax reduction would provide that beginning July 1, a full year ahead of the House’s proposed date to start car tag tax elimination.

House Majority Leader Jerry Keen called Lt. Gov. Cagle’s proposal a “hastily put together” plan that amounts to a “poison pill to kill tax reform this year.”

“If the Senate is serious about income tax reform, to really do something substantive, I don’t think you can do that in 24 hours,” he said. “It just looks like (they said), ‘We need to come up with something because they (the House) did.’”

Lt. Gov. Cagle said senators had to wait for the House finally to pass a tax relief plan before they could propose their own, because tax measures must originate in the House.

The House’s tax reform plan began last summer with Speaker Glenn Richardson’s crusade to abolish all property (ad valorem) taxes and replace the revenue with an expanded sales tax. A drastically reduced plan failed when it reached the House floor but was changed again to address House Democrats’ concerns and passed last week on the “Crossover Day” deadline.

The proposed constitutional amendment would do away with the vehicle property tax in two years, with cuts of about $329 million the first year and then $672 million by fiscal year 2011.

“In this economy, Georgians not only want, but need tax cuts,” House Speaker Pro Tem Mark Burkhalter said. “Most of all, they need cuts they can understand. They don’t need to hire H&R Block” to figure it out.

House and Senate leaders agree on two aspects in the House’s plan, which already have passed the Senate in different form: The governor’s suggested elimination of the state portion of property tax, a tax cut of about $30 per homeowner and about $90 million cut annually, and caps on how much property assessment values can increase each year.

House leaders said agreement on those points seems to be wavering now, too.

In a tense Senate Finance Committee hearing Tuesday on the House tax reform plan, Chairman Sen. Chip Rogers, R-Woodstock, moved to change the assessment caps to be based on government inflation rates.

The change would allow growth exceeding the 2 percent cap for homes and 3 percent for non-residential property that Sen. Rogers originally proposed. Also it gutted the House’s legislation eliminating the car tag tax, instead putting limits on state government spending. That proposal had been languishing in the House after passing the Senate last year.

Sen. Rogers’ measure would mandate any state surplus go first to education to fund new student enrollment, then to boost state reserves and then to reduce state debt or go back to taxpayers.

Rep. Richardson said he was shocked by the move from Sen. Rogers. He said they have worked closely on tax reform in the past but he was given the latest suggested changes only minutes before Tuesday’s meeting.

“It is an embarrassment,” the speaker said of Sen. Rogers’ alterations. “This is not close to providing tax relief to the state.”

The Finance Committee is set to vote today on Sen. Rogers’ substitute legislation — and possibly whether to drop cutting the car tag tax.

The Senate’s income tax cut should this week be attached to a bill that’s already passed the House, Lt. Gov. Cagle said.

Sen. Don Thomas, R-Dalton, said the Senate’s plan is “fair to all taxpayers” and “targets everybody who works.” But, he said the tax relief is far from its final form.

“We always have disagreement in the House and Senate,” Sen. Thomas said. “It gets worked out between the bodies.”

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Georgia General Assembly: www.legis.ga.gov