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Cagle, Republican senators unveil plan to cut state income taxes 10 percent

POSTED: March 30, 2008 5:01 a.m.

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Members of both houses of the General Assembly agree on one thing: They want to give voters an election year gift in the form of tax relief.

The thing they can’t agree on is how to do it.

The House has passed a plan, now being debated in a Senate committee, to eliminate the tax paid by vehicle owners. Dubbed the "birthday tax," because the payment is due on the car owner’s birthday, the plan would require amending the state constitution and would not be fully implemented for two years.

It would also cap the rate by which property taxes could rise and eliminate the state portion of property taxes, worth about $30 per household.

With the state’s economy sputtering, Gov. Sonny Perdue has expressed misgivings about the House plan because it would tear a $660 million hole in the budget once it’s fully implemented in two years.

Lt. Gov. Casey Cagle and Senate Republicans on Tuesday debuted a proposal to lower the state income tax for Georgians by 10 percent over five years. The late entry into the tax debate created immediate friction with the House GOP.

Perdue’s office had no immediate comment on the Senate plan, which would cost the state a whopping $1.2 billion a year when it’s fully phased in by 2013.

Cagle, of Chestnut Mountain, said the proposal would provide broad-based relief to every Georgian earning a paycheck. And he added that it would begin to kick in almost immediately, providing a boost for the sluggish economy.

"It is equitable to all. And I will tell fundamentally that I believe that every dollar that government puts into an individual’s pocket helps the economy," Cagle said.

The Senate contends that their plan, which only needs the approval of the legislature and signature of the governor, could help Georgians by midyear.

Income tax withholding would be adjusted downward beginning in July. It would provide $215 million in tax relief in the first year.

Senate Republicans argued the income tax cut was the way to go.

"It provides a tax cut across the board," said state Sen. Lee Hawkins, R-Gainesville, who stood with Cagle and most of the Senate Republicans at a Tuesday afternoon news conference. "It puts money back into the pocket of citizens immediately and is a good way to stimulate the economy."

Cagle said he did not have an estimate on how much the savings would mean for the average Georgian, saying it would varied by income. Those who earn more would save more under the plan.

House Republicans were unimpressed. They moved quickly to question the Senate’s timing in introducing a plan as the legislative session heads into its final days and suggested it could be intended as "poison pill" for the House proposal.

"It was obviously a hastily put together tax plan," House Majority Leader Jerry Keen said Tuesday.

House Speaker Glenn Richardson was testifying before a Senate panel on his plan Tuesday, but the lawmakers put off a vote, leaving the hearing to take the wraps off their own alternative instead.

Keen said while the Senate plan just tinkers with the income tax withholding rate, the House plan takes two assets — the car tax and state property taxes — off the tax rolls forever.

"It’s easy to understand," he said.

The battle over which tax to cut has echoes of last year’s GOP family feud. Richardson and Perdue squabbled over a House proposal to provide a one-time property tax refund to Georgia homeowners. Perdue vetoed the refund, arguing it was fiscally irresponsible.

This year they’ll be anxious to deliver something. State lawmakers are up for re-election in November.

The Associated Press contributed to this report.



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