The stage has been set for the issue that will draw most of the attention in this legislative session: revising Georgia’s transportation taxes.
The House leadership finally introduced a bill last week, HB 170, that will be the starting point for a debate certain to last all the way to adjournment on the 40th day.
Supporters of the bill, who include Gov. Nathan Deal and Speaker David Ralston, call it a “bold” plan to raise $1 billion a year to maintain the state’s transportation facilities.
“This is a bill which we believe will lead our state into the 21st century,” Ralston declared.
Those who would lose the most under the proposed legislation — local governments — complain the legislature wants to take away more than $500 million in tax money that rightfully belongs to them. Those are essentially the battle lines that the two sides have established.
There’s no question that HB 170 would dramatically revise the motor fuel tax charged on the retail sale of gasoline. Currently, that levy includes an excise tax of 7.5 cents per gallon, a state sales tax of 4 percent and, in most places, a local sales tax of 3 or 4 percent.
Under the proposed bill, that would all be converted to a flat excise tax of 29.2 cents per gallon. The excise tax would be indexed so that it increases as the rate of inflation and the fuel efficiency of vehicles increases.
There would no longer be a state sales tax collected on motor fuel and the variety of local option sales taxes would be phased out as they reach their expiration dates.
The bill’s supporters claim that it will not result in an increase in state taxes. I’m going to be as diplomatic as I can and observe that the statement is not entirely accurate.
The current mix of excise and sales taxes on gasoline totals roughly 27 cents per gallon. The 29.2 cents per gallon excise tax spelled out in the bill would thus amount to a small tax increase at the state level.
The indexing of the excise tax puts in place a mechanism by which it could be automatically increased as inflation goes up, without legislators ever having to vote on those future tax increases.
Those who drive cars powered by electricity, natural gas or propane would be required to pay an alternative fuel tax of $200 or $300 a year under the proposed bill, which would be a tax increase for them.
Most importantly, HB 170 would result in a transfer to the state treasury of more than $500 million in revenues that now flow to local governments each year through their sales taxes on gasoline.
That revenue shift would require city governments, county commissions and school boards that depend on the local motor fuel sales tax as a revenue source to raise other taxes to make up for the loss of money.
As one city official observed, “This is a tax grab.” That is true; the state would grab $500 million in tax revenues each year from local governments, who then would be under pressure to vote for politically unpopular tax increases to make up for the loss.
Local government officials are already pushing back hard against HB 170 as it is currently written. They successfully opposed an attempt by then-Speaker Glenn Richardson in 2007 and 2008 to pass a “GREAT” tax plan that would have eliminated property taxes but would also have taken the authority for setting local taxes away from local governments and moved it to the state.
Anti-tax activists are also not pleased with the House leadership’s proposal.
“They absolutely have not met the criteria for more funding,” tea party leader Debbie Dooley said. “They continue to be fiscally irresponsible with tax dollars.”
The two armies are gathered to do battle. On one side, you have the legislative leadership, the highway contractors and the business groups like the Georgia Chamber of Commerce who support HB 170. On the opposing side, you have local governments who will be squeezed the hardest by the bill, joined by the various anti-tax groups.
It’s too early to say which side will prevail, but it should produce a very entertaining session at the Gold Dome.
Tom Crawford is editor of The Georgia Report.