Georgia Gov. Nathan Deal has to be overjoyed with the tax bill approved in the General Assembly last week that now awaits his expected signature into law. The mixed bag of cuts and increases matches what he promised during his campaign and reiterated in his State of the State speech. Not everyone should share his joy, though. In their zeal to cut taxes, legislators created a bill that falls far short of useful reform and one that decidedly favors some constituencies over others.
The tax break bill rushed through the GOP-controlled General Assembly gives the appearance that taxpayers will save money. It also allows legislators seeking re-election to truthfully say that they voted to cut taxes. That's a popular mantra these days, but one that often camouflages some uncomfortable truths.
The truth is that the tax package will create a $49 million revenue deficit next year, according to those who have read the bill. That's just the initial cost. A nonpartisan estimate from Georgia State University suggests that the cost of the legislation over the next three fiscal years will be at least $200 million and perhaps far more -- much of it to local governments that currently get funds from various levies that will be reduced or eliminated. The loss in revenue, of course, means that state and county officials will have to replace it -- or cut their budgets.
Those who rushed to approve the package now on Deal's desk don't seem overly concerned about shortfalls. They say that the tax breaks it contains will attract new businesses and jobs to the state, and that it will put a bit more money in people's pockets. That in turn should produce new spending that will replace lost revenue. Maybe. Maybe not. Truth is, that explanation sounds suspiciously like a variation on the now disproved trickle-down economic theory that inexplicably is still the darling of many conservative policymakers.
The new legislation will benefit some individuals and groups once it becomes law.
Married couples will be able to shield more money from the state income tax. Those who own vehicles will gain from a slow phase-out of property tax on cars and trucks. Many businesses and the agriculture industry will see fatter bottom lines as some taxes expire and some tax credits expand. Those benefits, though, will reduce government revenues.
Legislators say not to worry, that the new bill will balance the books by collecting sales taxes from major Internet retailers, by removing the sales tax exemption for film producers and by capping a tax exception on retirement pay for state residents. That is an overly optimistic view. Less biased sources say the tax package will fall short of replacing lost revenue. The Internet tax, the largest enhancer in the package, is the main reason for that opinion. Other states have tried the same tactic, but mostly without success. The Internet giants have fought back, filing lawsuits that continue to delay collection of the sales tax.
The real reason for approval of the tax bill is self-preservation. One Republican senator inadvertently admitted as much when he urged his colleagues to approve the plan since they face re-election this fall. "I know when you knock on doors this summer, the biggest question is jobs," said Don Balfour. "And this will help jobs in our cities and counties and state."
Legislators should have tackled a broad range of issues related to tax equity. Instead, they burnished their tax-cutting resumes. Consequently, the need for meaningful tax reform in Georgia remains.