ATLANTA—As Republicans scramble to rework the plan to overhaul the state’s tax code, critics say the latest version leaves a $220 million hole in the budget — creating more problems than it would solve.
The bill incorporates pieces of a proposal offered by the tax council created last year by the Legislature, and details of the new version are outlined in a fiscal note from the state auditor’s office dated Wednesday and addressed to House Ways and Means Committee Chairman Mickey Channell.
House Democrats raised concerns last week that the measure could hurt the middle class. The new proposal aims to protect middle and upper-middle class taxpayers by increasing their itemized deductions. Earners with federally adjusted gross incomes of $80,000 for single filers and $160,000 for joint filers would get a lump-sum deduction.
The plan does include taxes for labor for car repairs and on telecommunications services from cable to cell phone text messages. According to the fiscal note, prepared by the Georgia State University Fiscal Research Center, the estimated revenue impact of the plan for next year would be at least $220 million. That estimate decreases to a minimum impact of $180 million in 2013, but skyrockets to $286 million in 2014.
House Majority Leader Larry O’Neal on Thursday touted the plan as one that will promote job creation and keep the state competitive with its neighbors. He dismissed the notion that it would create millions in debt for the state and said the fiscal note does not take into account an economic recovery.
“It frankly does not include any potential growth as a result of doing this,” O’Neal said. “We feel like the $220 million will be absorbed in growth. We feel pretty confident that’s going to be the case.”
The clock is ticking on the bill to pass the Legislature before the end of the 40-day session.
O’Neal said he feels good about the legislation’s prospects for passage next week.
“There’s probably more urgency now than ever that we establish some guidelines for the recovery that we’re in,” he said. “That sends an incredible message that we’re open for business.”
He added that 2012 is not a factor in the decision to take up the bill now.
“This might sound Pollyanna-ish ... I realize there’s politics in everything, but there was no design to do this in a non-election year,” he said. “We will be accountable for this vote whether it’s now or next year.”
House Minority Leader Stacy Abrams said that while the new version solves the problem she initially identified, it creates new ones.
“Tax policy is complicated and it’s sensitive,” she said. “This approach neither simplifies the situation nor solves the problem. And we’ll have one day as a Legislature to grapple with this issue.”
For the measure to pass this year, it would have to be introduced and passed on Monday — a move Abrams called fiscally irresponsible. She suggested tabling the issue until next year.
Under the 2010 law that established the tax council’s guidelines, the Legislature must bring the issue to the floor by April 2012, the end of the current two-year session.
“We’ve got plenty of time,” she said. “There’s no urgency to this bill.”
Georgia Budget and Policy Institute Executive Director Alan Essig called the proposal a “revenue loser” and said the plan is counterproductive.
“The idea of putting us in a further hole in the future is the exact opposite direction we need to be going,” Essig said. “This isn’t tax reform anymore. It seems it’s more about a short-term political impact.”
Essig said the plan helps wealthy Georgians and businesses, but hurts priorities like education, infrastructure and transportation and doesn’t create jobs. He added that it goes against the tax council’s push for revenue-neutral legislation.
“Right now, it’s better to do nothing than what they’re doing,” he said. “They should just throw it out and start over next year with a comprehensive plan, not a scaled-down tax cut version. This is not within the spirit of what the tax council recommended.”
House Bill 388: http://legis.ga.gov