Question of the week: On the final day of the legislative session, Georgia state Rep. Tom Kirby, R-Loganville, introduced the “Fair Taxation Act of 2014.” The bill would eliminate the Georgia income tax and replace it with a higher sales tax. Do you think the plan would benefit the state and its economy?
State Rep. Tom Kirby's plan to eliminate Georgia's income tax would result a more robust economy, more successful companies, more jobs and more residents.
Nine states have no individual income taxes. (Two of those states, Tennessee and New Hampshire, do tax dividends and interest income, a policy Georgia should avoid since it encourages the wealthy to stay away.) According to a recent Forbes article, economic growth in those nine states "skyrocketed from 1998 to 2008 almost 50 percent faster than in the nine states with the highest top personal income tax rates. Job growth rocketed ahead more than twice as fast in the nine no-income-tax states as compared to the nine top income tax rate states."
A 2012 study by Stephen Moore of the Wall Street Journal and famed economist Art Laffer points out that eliminating an income tax doesn't mean less revenue for state government. In fact, it likely means more of the 11 states that adopted a state income tax in the last 50 years, nine of them experienced a decline in tax revenues. That's because in income tax is so stifling to state economies.
All 11 states that passed an income tax in the last half-century grew more slowly than the rest of the country after adopting an income tax, and "per capita income relative to the U.S. average declined substantially after adoption of state income taxes in all 11 states," according to Moore and Laffer.
Statistics and data sets routinely indicate that states without personal income taxes have stronger economies and better job markets. Still, nothing exposes the value of getting rid of a state's income tax better than the millions of Americans fleeing states with high income taxes for income tax-free locales.
"Over the past decade, states without an income tax have seen 58 percent higher population growth than the national average, and more than double the growth of states with the highest income tax rates," wrote Moore and Laffer in the Wall Street Journal.
Earlier this week, largely because of its lack of a personal income tax, Tennessee was named the best place to retire, according to Bankrate.com. South Dakota, another income tax-free state, was ranked third -- despite being South Dakota. Chief Executive magazine released a survey of CEOs on Tuesday that found Tennessee is the fourth-best state in which to do business. Texas and Florida, two other states without individual income taxes, finished first and second. As for Georgia? Well the Peach State didn't fare so well, and the state's income tax is one of the primary reasons for not placing better in these important rankings.
For the sake of Georgia's economy, government, business climate and, most importantly, the state's residents, passing Kirby's Fair Taxation Act should be the first order of business when the state legislature reconvenes next year.
— The Free Press
Rep. Tom Kirby
Eliminating the state income tax and replacing it with a consumption tax will absolutely be a benefit to the Georgia economy. This move will help Georgia compete with other states to attract business and expand our economic base. Georgia businesses will be more competitive in the marketplace in the United States and around the world by eliminating some of the tax burden. Georgia residents will see an increase in their purchasing power.
The current tax codes at both the state and federal levels are in dire need of transformation, not merely minor reforms and tweaks that only make the code more complicated, cumbersome and expensive. The American people and the people of Georgia are ready for serious transformation and bold solutions to solve our problems. The Fair Taxation Act is a good start.
Vice president of the Georgia Public Policy Foundation
A huge challenge to tax reform is that special interests protect their own breaks. When the special council on tax reform recommended in 2011 that Georgia transition from an income- and investment-based state taxation system to a consumption-based system (sales tax) everyone thought it was a good idea -- for everyone else, that is.
It's clear that to compete with its neighbors and keep and grow jobs, Georgia must cut and eventually eliminate state income taxes. The problem is gaining agreement among voters on the revenue sources that must offset those cuts to balance the state budget. To that end, Georgia Tech economics professor Christine Ries developed a reality-based "game" where voters can "play" with actual Georgia revenue data to customize a solution. The best part is that www.Taxreformthegame.com reflects the realities of revenue-neutral solutions.
Dr. Christine P. Ries
Professor of economics at Georgia Institute of Technology
The Fair Tax plan introduced by Rep. Ton Kirby is pro-growth tax reform. It shifts incentives throughout the economy and rewards those who create jobs, save money and invest. Anyone who argues differently must be claiming that incentives don't matter.
Lower income tax rates generate economic expansion. States that increase income taxes in order to retain low sales taxes become outlet malls. People move out of the state, but everyone goes there to shop.
Executive director of the Georgia Republican Party
I'm proud to see Republicans taking the lead on tax reform in Georgia. Tax law continues to become complex and difficult to navigate. A sales tax-based revenue collection system, like a true flat tax system, in addition to having the benefit of being fair and equitable, has been shown to be inviting to new businesses and the jobs associated with them.