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Cheers and celebratory handshakes swept through the Georgia Legislature last week when it overwhelmingly passed a bill to overhaul much of the state’s tax code.
But some good government types and fiscal watchdogs were disappointed by the process. It was unveiled and passed in less than a week.
One top aide to Gov. Nathan Deal said the legislation, House Bill 386, is good for Georgia.
"This pro-jobs, pro-family tax reform broadens the tax base so we can lower the tax burden overall," Deal spokesman Brian Robinson said in The Atlanta Journal-Constitution the day after the House passed the bill. "It’s important to remember ... that this is an overall tax cut. We can’t get away from that fact."
Since some people have questions about the bill, and it passed so quickly, we wondered whether Robinson is right?
Let’s take a look at the 56-page bill.
If you’re married, you’ll probably like the bill. It would increase exemptions by $2,000 for married couples who file joint returns and by $1,000 each for spouses who file separately.
If you’re retired, you may not like it. The bill would cap the exclusion on the state collecting taxes on nonwork income at $65,000 for Georgians 65 and older. The state’s current policy would allow the cap to rise significantly to $200,000 by 2015 and eventually no cap at all.
If you frequently shop online, you may not like it. The legislation would impose a tax on some items purchased on the Internet.
There are other changes as well. It would eliminate the annual ad valorem tax on vehicles that the state’s car owners pay on their birthdays. It would be replaced by a one-time title tax. The bill would end the sales tax exemption for film production activities but bring back the sales tax holiday a couple of times later this year and in 2013. HB 368 also would phase out most of the sales taxes on energy used in manufacturing, mining and newspaper publishing. There are other exemptions in the bill concerning agriculture and construction materials.
State officials estimate the government will see a $62.8 million decline in revenue between now and the end of fiscal year 2015. Local governments would see a greater decline of nearly $200 million during the same time period, according to the state research, which was put in an eight-page fiscal note.
The bill’s proponents believe the legislation will result in increased economic activity in the state and more jobs, which will more than make up for the estimated cuts.
Robinson, who also holds the title of Deal’s deputy chief of staff, said he was specifically referring to the impact on state revenue.
"Overall [which is the exact word I used], this decreases tax revenue," Robinson told PolitiFact Georgia.
Georgia lawmakers tried a similar bill last year, but it never came up for a vote for several reasons, including concerns that the state’s revenue estimates were inaccurate. This year, there have been no widespread complaints about the numbers, although there were complaints that not enough time had been allowed to properly review the proposal.
The state’s figures show a $22.7 million surplus in state revenue in FY 2015, which begins July 1, 2014, and ends June 30, 2015. There is a deficit in FY 2013 and FY 2014 of a combined $85.5 million to the state. The difference between FY 2015 and the two other years is that the sales tax holiday and the construction materials exemption are not included in FY 2015. The sales tax holidays amount to an estimated annual $40 million net loss to the state while the construction exemption is projected to cost the state about $20 million a year.
Kelly McCutchen, president of the Georgia Public Policy Institute, a fiscally conservative think tank, said the Legislature will probably continue both exemptions before they expire because of their popularity with the public.
"It took a recession to get rid of the sales tax holiday," he said.
Robinson’s claim passed one major political hurdle. The Washington, D.C.-based Americans for Tax Reform has its problems with the bill, specifically that it believes the Internet tax provision is unconstitutional and that the legislation doesn’t go far enough in accomplishing "tax reform."
Still, Josh Culling, its state affairs manager, called the bill a "net tax cut," basing that conclusion on the fiscal note.
The organization asks political candidates to sign a pledge not to support any legislation that results in a net tax increase. The pledge is virtually a requirement for any fiscal conservative who wants to get in office. Deal has signed the pledge, along with nearly one-quarter of the Georgia Legislature.
"While we are not excited about many of the tax changes in the bill, we have informed the Legislature that it is compliant with the Taxpayer Protection Pledge," Culling told us in an email.
Alan Essig, executive director of the Georgia Budget & Policy Institute, which constantly monitors fiscal matters at the state Capitol, agreed with Robinson’s statement if you define an overall tax cut as a decline in taxes collected by local and state governments.
Speaking about the changes concerning retirement income, McCutchen said "that technically is a tax increase on senior citizens. But I would say [Georgia already has] one of the more generous retirement exclusions in the country."
McCutchen, a supporter of the bill, agreed with Robinson’s claim.
"Overall, it’s a tax cut, and I don’t think there’s much debate on that," McCutchen said.
We’d like to see more years worth of estimates to see how much revenue the state would collect past FY 2015. Some believe the state will see a surplus in revenue if Georgia’s population grows and more people buy cars. They could be right, especially if the sales tax holiday and construction exemption do not continue past FY 2015.
Since Robinson’s quote was based solely on the impact to the state, and not to its taxpayers, the current state estimate does back up his claim -- unless the construction exemption and sales tax holiday don’t continue.
Based on the current estimates, we rate Robinson’s claim as True.
The Atlanta Journal Constitution, "House blesses tax bill, but critics slam process, consequences," March 21, 2012
Email from Brian Robinson, communications director for Gov. Nathan Deal, March 21, 2012
Email from Americans for Tax Reform, March 22, 2012
Georgia House Bill 386
Georgia House Bill 386 fiscal note
Telephone interviews with Alan Essig, executive director of the Georgia Budget & Policy Institute, March 21 and 22, 2012
Telephone interviews with Kelly McCutchen, president of the Georgia Public Policy Institute, March 21 and 22, 2012
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