While some may quibble with the details, and some adjustments will certainly be made, if enacted, the Tax Council’s pro-growth tax reforms will make Georgia a national model. Expect many states to follow our lead in the near future.
The recommendation creates a true flat tax on income and incrementally shifts revenues to a broad retail sales tax. Both income and consumption would be taxed at a low rate of 4 percent and the tax code would be simplified. Expanded targeted tax credits would protect low-income senior citizens and families.
While we would hope that a tax increase is not necessary, the Council’s mandate was to recommend the best possible tax base — what we tax and how we tax it. After this is settled comes the political decision on where to set the rates. Linking these reforms to a strong tax and spending limit would assure taxpayers this is not a veiled attempt raise taxes.
The Council’s guiding principles were unanimously approved and applauded by tax experts of all political stripes. Overall, the final recommendations are right in line with these widely accepted economic principles – something to remember as the howling of the special interests (also of all political stripes) begins.
Removing the biased sales tax on energy gives a competitive boost to agriculture, mining, forestry and manufacturing. Small businesses, startups and other innovative companies benefit from personal income tax reductions. Most of these high-wage, job-creating businesses now pay personal rather than corporate income taxes and their entrepreneurs can choose to live anywhere they want.
The proposal does not hurt the poor. Food stamp exemptions and tax credits more than offset any negative impact on low-income families. In comparison, Florida, Texas and Tennessee rely on higher property and sales taxes, yet offer no low-income tax credits. Groups concerned about regressive taxation should focus on the plan’s 84 percent increase in tobacco taxes.
Allowing families to keep more of the income they earn and letting them decide how to spend it is the right thing to do. The income tax is less a tax on the wealthy, who have many ways to avoid taxes, than a tax on becoming wealthy. It is a tax on upward mobility.
Georgia has the opportunity to create a broader, more efficient, more stable and faster growing tax base to address our long-term budget needs. Adopting a pro-growth tax code is an important step to getting our economy back where it belongs, and these recommendations are a major step in the right direction.