Last month it was Georgia Senate President Pro Tem Butch Miller, a candidate for lieutenant governor in 2022, trying to play to his Republican base by vowing to eliminate the state income tax.
“Taxation is theft. Pure and simple,” Miller declared in his press release announcing proposed legislation.
This week it was former U.S. Sen. David Perdue, who is challenging Gov. Brian Kemp in the Republican primary next year, promising as he entered the race this week to end the state income tax – which brings in more than half of all revenue for k-12 schools, colleges, public health, criminal investigations, prisons, and mental health programs.
Neither has said so far what he would do to either cut enough spending to make up for the $14 billion a year in lost revenue or raise other money, for instance, through a hike in the state sales tax.
“I’m laying out the high ground here,” Perdue told the Atlanta Journal-Constitution. “This is my wheelhouse. We’ve got to be more competitive. There are ways to pay for it, and other states have accomplished that. I’ll work with the Legislature on it – instead of fighting with them – to make this a reality.”
Other GOP candidates running next year have also pledged to end the state income tax, including former Democratic Rep. Vernon Jones, who is running for governor, and Republican activist Jeanne Seaver, who is running for lieutenant governor and would replace it with higher sales taxes.
Credit: Isaac Sabetai
Credit: Isaac Sabetai
House Appropriations Chairman Terry England, R-Auburn, who has voted to cut the income-tax rate in the past, said eliminating it altogether could be a disaster for state finances.
“Well, you either eliminate k-12 education – that’s about what we put into it – or if you don’t want to do away with that, I think you would wind up with a 17% state sales tax rate to offset the loss of revenue, if you don’t change the base.”
Senate Minority Leader Gloria Butler, D-Stone Mountain, was more blunt about the politics behind the proposals.
“Beware of those peddling shiny objects,” Butler said. “You simply cannot take away half of the state’s revenue and expect there to be no impact.
“A move like this would gut public schools, our university system and many other services Georgians rely on. Make no mistake, those peddling this scheme will find the money somewhere, and it will likely come from our pockets in the form of a sales tax.”
Stacey Abrams, a Democrat running for governor, helped sink a big income tax bill a decade ago while serving in the General Assembly. That proposal would have raised taxes on some middle-income families but cut taxes for upper-income Georgians.
“Georgians deserve more than gimmicks and bad math from those who seek to lead,” she said of the latest proposals. “Eliminating state income tax is not an option for anyone who believes in public education, public safety or the public good.“
England said the state’s current mix of revenue – which mostly comes from the 5.75% income tax and 4% sales tax – has kept finances stable and allowed Georgia to annually balance its budget. Georgia has maintained a AAA bond rating for decades – meaning it can borrow money at the lowest interest rates - and bond-rating agencies often cite the revenue mix as one of the reasons why.
But critics of the income tax say its elimination would make Georgia more competitive when it comes to attracting businesses and wealthy individuals wanting to relocate and invest in the state.
The taxes the state collects help it educate 2 million children, provide health care to more than 2 million Georgians, manage and improve parks, investigate crimes and incarcerate criminals, and regulate insurance firms, utilities and dozens of professions. The state issues driver’s licenses and helps pay for nursing home care for the elderly.
The state is a major provider of treatment for mental health and drug addiction, and it helps fund public health programs that are fighting the coronavirus pandemic. Besides paying salaries, it helps make sure that hundreds of thousands of former teachers, university staffers and state employees receive pensions and health care.
Some Republicans have been pushing to cut the income tax rate for years. Miller’s top Republican opponent in the lieutenant governor’s race, state Sen. Burt Jones, R-Jackson, has called for a cut in income tax rates.
Perdue notes that neighboring Florida and Tennessee don’t have state income taxes. Both states are tourism meccas and raise money from other taxes to fund their budgets.
Perdue’s cousin, Sonny Perdue, first ran for governor in 2002 on a promise to eliminate state income taxes on the nonwork income – investments, pensions, etc. – earned by senior citizens. His pitch was that it would attract well-to-do-retirees or keep those already in Georgia from moving to Florida. It’s unclear whether it has.
The General Assembly approved his proposal, although it was capped during the Great Recession because the state couldn’t afford to lose about $1 billion in annual revenue.
As a U.S. senator, Perdue was a major proponent of the massive income tax-cut legislation the Republican-dominated Congress approved in late 2017. But Congress didn’t cut spending to make up for the loss in revenue. Unlike Congress, the state of Georgia must by law balance its budget each year.
Kemp campaign spokesman Cody Hall noted that the incumbent and the General Assembly balanced the state budget and provided an income-tax cut during the COVID-19 pandemic.
By contrast, Hall said, after promising to hold down spending in Washington, Perdue left office with the federal government facing a hugely inflated national debt. That was partly due to the tax cut, but also due to massive federal spending to fight the pandemic and temporary collapse of the economy.
Hall said, “His empty campaign rhetoric doesn’t match his record.”
When asked how the state would make up for the lost revenue if income taxes are eliminated, Miller, the candidate for lieutenant governor, said: “We will follow the best practices of other states that don’t collect income taxes. Georgia has a surplus, and I believe that money should go back to taxpayers.
“Florida and Tennessee don’t have income taxes and they make it work. We can too.”
State officials have already reviewed a proposal that would phase out income taxes and make up for the lost revenue by increasing the state sales tax from 4% to 7% and broadening the base to include taxing services, such as for using a Realtor, financial adviser or dry cleaner, or for maintenance or repair work at your home.
With local sales taxes included, consumers would, for instance, pay a sales tax in the neighborhood of 12% in Atlanta.
Even in that scenario, the state would lose hundreds of millions of dollars for a few years before sales taxes started eclipsing the former income-tax revenue, according to a state auditor’s report.
England said he doesn’t expect the legislation will be taken up in the upcoming 2022 session.
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