A taxing change
Read about details of the bill in a weeklong series
Monday: The Georgia Communications Services Tax Act would place a new 7 percent tax on all communications services, including cell phone plans, satellite services and cable.
Tuesday: The bill would eliminate the 4 percent state sales tax exemption for groceries, which are currently taxed at 3 percent by local governments.
Wednesday: In an effort to move away from income taxes, the overhaul would place the burden on consumer services by taxing things like haircuts, veterinary services and lawn care for the first time.
Thursday: The bill could eliminate income exemptions for senior citizens.
Friday: Gas would go up by 6 cents per gallon under the bill.
Saturday: Cigarette taxes would almost double, moving from 37 cents to 68 cents per pack.
Proposed tax changes
Based on recommendations released in January by a 10-member Special Council on Tax Reform and Fairness, the changes would shift Georgia from income taxes to sales taxes. The 127-page bill eliminates many longtime sales tax exemptions, including the statewide 4 percent exemption for groceries. Other ideas are to increase taxes on cigarettes, gasoline and cell phones and place taxes on consumer services, such as haircuts, veterinary visits and lawn care.
Status in the General Assembly
The bill sits in the 12-member Special Joint Committee on Georgia Revenue Structure, where top House and Senate leaders will hammer out the specifics before sending the bill to the chamber floors for a vote. The council likely won't touch the bill before Friday and may not pass legislation until next year's session.
Hall County sales tax breakdown
Total: 7 percent
State: 4 percent
Special purpose local option sales tax for education: 1 percent
Local option sales tax: 1 percent (a property tax credit offsets this sales tax)
Special purpose local options sales tax: 1 percent
Constitutional amendment questions
Voters may be asked to approve three constitutional amendments to enact the tax overhaul submitted by the Special Council on Tax Reform and Fairness. The proposed amendments would be on the ballot in November 2012.
Local government franchise fees on cable television and telecommunications companies would be replaced with a 7 percent fee on a wider spectrum of services, including satellite service and cell phone plans. The state would collect the tax and return 3 percent to local governments, but divvying up the money requires a change in the constitution.
The legislation would set up the Economic Development Trust Fund to attract businesses to Georgia or reward existing businesses for expansion.
A constitutional change would also create a statewide fiscal impact standard for any new bills that come through the legislature. Tax exemptions would be filed during the first year of the General Assembly's two-year term but not acted on until the second year unless two-thirds of lawmakers vote to pass it immediately.
Statewide lawmakers soon will undertake the massive task of rewriting Georgia's tax code, leaving consumers worried about how it will hit their wallets.
Leaders in the House introduced legislation at the end of February and formed a committee with Senate leaders to tackle the overwhelming changes that would move Georgia from income-based taxes to sales taxes.
Legislators hope the changes will makes Georgia more attractive to businesses.
"The argument is that taxing income has a larger negative effect on growth than taxing consumption," said David Sjoquist, an economics professor at Georgia State University and a member of the Special Council on Tax Reform and Fairness, which made recommendations in January on what the legislation should look like. "Taxing investment and labor gives the incentive to work less and invest less and therefore grow less. This is backed by empirical work."
The council's reform package is aimed to be a wash for taxpayers. A lower income tax rate would make up for the increase in consumer taxes, he said.
"What we wanted to do was have something revenue neutral, though we were not able to do the estimates before we submitted the proposal," Sjoquist said.
"It appears to be a proposed revenue increase, and our intent is for the General Assembly to make the changes so that's not the case."
But there's no doubt some groups will be hit more than others.
"With any tax reform, you'll have winners and losers," he said. "Some will go up and some will go down for consumers and businesses, so with the different changes you're going to find some increase and some decrease."
The 10-member tax council, appointed during the 2010 legislative session by Gov. Sonny Perdue, Lt. Gov. Casey Cagle and House Speaker David Ralston, was charged with gathering the opinions of Georgians across the state and creating an overhaul of the state's tax code. It drafted recommendations after six months of public hearings.
Intended to broaden the tax base and be revenue-neutral, the bill reinstates some taxes, including the 4 percent state sales tax on groceries. Other ideas were to increase taxes on cigarettes, gasoline and cell phones and place taxes on consumer services such as haircuts, veterinary visits and lawn care.
Tax council members presented their ideas at three meetings for the Special Joint Committee on Georgia Revenue Structure, where top House and Senate leaders started to pick apart the details.
"I don't know what the thinking is right now," Sjoquist said. "People have opinions, and whether that represents one person or the whole General Assembly, I don't know. I'm trying to stay out of the politics."
House Ways and Means Chairman Mickey Channell, R-Greensboro, and House Majority Leader Larry O'Neal, R-Bonaire, co-sponsored bills that would create constitutional amendments for voters to approve whether the new communications services tax should go directly to counties, if an Economic Development Trust Fund should be created to implement the tax changes and whether a statewide impact standard should be created for fiscal bills presented to the General Assembly.
"Everything in the bill is from the tax council, and we haven't acted on any of it yet," O'Neal said Wednesday. "We took the entirety of the recommendations, which was about 100 pages, and gave it to legislative council to incorporate all of the recommendations."
For now, lawmakers are concentrating on passing the fiscal 2012 budget and pushing bills through committees before Crossover Day on Wednesday, the 30th day of the session when bills must pass from one chamber or die.
"The tax council stuff is not subject to the 30th day rule, and from a priority standpoint, we won't be taking up any of the details just yet," O'Neal said.
Getting a thumbs-up from voters could take time, meaning the joint committee may take the summer to investigate details and make decisions during next year's legislative session. However, O'Neal and Channell hope to get somewhere with the bill this year.
"We owe it to this council that worked so hard and unselfishly to compile this tremendous amount of data," O'Neal said. "We don't have a huge appetite for putting taxes on Girl Scout cookies or those type of details, but there are tremendous ideas for job creation, which hopefully we can do as a short-term deal before serious tax reform next year."
Tax council members hope lawmakers will stick to the original intent of viewing the recommendations as a total package.
"Politics is complicated and making policy is never easy, so I expect a relatively intense debate," said Roger Tutterow, an economics professor at Mercer University and tax council member. "There's a tendency from some analysts to zero in on one or two parts of the reform and not look at the whole."
Tutterow has received the most questions from industries concerned about the sun setting on specific sales tax exemptions.
"It's good for the government to do a periodic review of every exemption to see if the rationale is still relevant today," he said. "Some may be reinstated or kept once the review is concluded, such as those related to nonprofits and health care."
The plan draws criticism from both sides of the aisle, leaving lawmakers curious if the bill will make much headway.
"I'm not hearing anything at this point, and I have a lot of concern personally because this isn't the time to implement these changes," said Rep. Carl Rogers, R-Gainesville. "In a better economic time, probably, but we still have a ways to go as far as downsizing government agencies, combining departments and helping Gov. Nathan Deal transition. He's been here three months."
Rogers, who has focused his legislative session efforts on the 2011 supplemental and fiscal year 2012 budgets, doesn't predict any tax changes this year.
"I don't think anybody wants to go there right now," he said. "There's so much work to do, and I don't see anyone moving quickly on it."