21 Aug 2014
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Now Is Not the Time

The proposal to overhaul Georgia's tax code has come back to life and it may ding your wallet.

Now Is Not the Time

Your friendly state House and Senate members have been playing tax reform poker down at the Gold Dome, and it looks like everyday Georgians may get royally flushed if what some legislators are proposing gets passed into law.

This all started with a valid concern by former Gov. Sonny Perdue that Georgia’s tax code had been amended and fiddled with so much over the years, that it needed to be cleaned up and simplified. Last year, the General Assembly passed legislation letting Perdue put together a blue-ribbon panel (the Special Council for Tax Reform and Fairness) to examine the state tax code. The panel held hearings all across the state and then presented the legislature with its recommendations.

The goal was for the panel to develop a clean efficient tax code that eliminated breaks for special interests. As envisioned, in order to take political horse-trading out of the process, this reform package was to be presented as one bill that would get a straight up or down vote by the House and Senate after a review by a conference committee. Well, that part of the plan failed almost immediately.

As presented by the special panel, the state income tax for individuals would see the top bracket reduced from 6 percent to 4 percent and corporate tax rates would also be reduced. In return most “labor” services such as veterinary care, haircuts and others that are currently exempt from the state sales tax would now be subject to it. Also, most special sales tax exemptions and breaks that had been handed out to special interest groups would be eliminated.

The part of the original plan stirring up the most backlash was the proposed reimplementation of the 4 percent state portion of the sale tax on groceries. Once legislators realized they could never muster the votes to pass the proposal if the grocery tax were in the bill, it became open season on changing the proposal.

Virtually every special interest group and business association in the state unleashed their lobbyists in order to protect their own pet tax breaks. Veterinarians wanted to keep their services free from sales tax, as did the hairstylists, auto mechanics, attorneys, pedicurists, dry cleaners and others. Of course, various industry groups with special exemptions from the current tax code also began strong-arming the legislators.

Then the populist causes reared their heads. Soon legislators were back peddling even more, claiming they would not tax Girl Scout cookies and prescription medications. Before long legislators just didn’t have enough wherewithal to eliminate most of the loopholes and special exemptions that currently exist.

Many pundits declared that tax reform was dead for this year, then suddenly it clawed its way back to life in a greatly modified form. Until the gavel sounds on the evening of the 40th day of the annual General Assembly, anything is possible.

The new official plan won’t be released until this week, but from what has been revealed so far it appears that some lobbyists were more successful than others. Legislative leaders have indicated that other than auto repair labor, no other services would be taxed. However, two big tax additions would appear. Your cell phone and satellite television bills would now be subject to sales tax. That’s an extra $20 a month in sales taxes for my household just on these two items.

Also legislators have indicated the new plan calls for the private sale of automobiles to now be subject to sales tax. This one makes my blood boil. Under current law, if you buy a new $35,000 car from an automobile dealer you’ll pay sales tax, which for Bartow County is 7 percent. That works out to $2,450.

Currently, you can sell this car used to someone else later and there is no sales tax due as long as the transaction is between two individuals. If you trade the car in and a dealer resells it, then sales tax is collected again on the new purchase price. Well the car dealers don’t like that, so they have actually been lobbying to make private sales also subject to taxation and the legislators have been listening. Pull up their campaign contribution disclosure reports and you’ll see most state representatives and senators get regular contributions from the auto dealers group.

If this passes, not only will you shell out big bucks for sales tax when you buy your new car (as in the example above), big bucks will also be due when you sell that car a couple of years later to your neighbor.

Perdue was right about Georgia’s tax code and I’m strongly in favor of reform. However, all this new proposal appears to be is more tinkering under the hood with high dollar lobbyists protecting the special tax breaks their clients are getting.

Some legislators are saying this tax reform package is a jobs bill. Maybe they saw how gullible Americans were when we let President Obama and the Democrats, who controlled Congress at the time, borrow and waste a fortune in so-called stimulus spending on the promise it would create jobs that never materialized.

Well, this state tax reform proposal isn’t a jobs bill, and in reality it’s not much of a reform bill. Now is not the time to pass this monstrosity. To my Republican friends, I say don’t rush it through or I can see serious political fallout.

Follow me on Twitter @chuckshiflett and also check out my statewide columns at: The Backroom Report.

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