A taxing change
This article is the fifth in our weeklong series outlining the coming tax changes.
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.
Senior citizens are worried that proposals made by a tax council to revamp Georgia's tax code will do more harm than good for their wallets.
Many feel the recommendations of the Special Council on Tax Reform and Fairness for Georgians — which aim to move Georgia away from an income based tax and toward a consumption based tax system — disproportionately hurt seniors who are already battling inflation and higher costs for things such as fuel and health care.
One of the council's recommendations is to do away with income tax exemptions for retired senior citizens.
"Current Georgia Law provides for an increasing retirement income exclusion over the next five years with a 100 percent exclusion of retirement income by 2016," the council wrote in its January report. "The tax council was unable to prove that this exclusion has a positive economic impact. The Fiscal Research Center estimates, upon full implementation, a revenue loss of over $270 million from this exclusion."
In 2003, former Gov. Sonny Perdue lifted the cap on the amount of retirement income exempt from income taxes, said Kathy Floyd, advocacy director for AARP Georgia.
"When the legislature passed a large tax legislation piece in 2003 ... one of the things that Perdue did was to increase this exemption over time from $14,500 to $35,000 for a single person and $75,000 for a couple," Floyd said. "In 2010 another part of his agenda was passed and it hasn't fully gone into effect yet, but the plan was for this pension income to be totally excluded from income taxes."
Floyd said AARP does not want to see an end to all tax exemptions but would support a compromise.
"We are recommending that they not eliminate the entire exemption but instead return to the 2003 exemption. That way seniors of modest means would still get a break on their income tax returns," Floyd said. "To us, that would represent a shared sacrifice across incomes and generations. You would still be paying income tax over that threshold.
"We are operating right now with the 2011 budget at what we were operating on in 2005 but with a million more people in the state. And that translates into more teachers, more schools, more roads, more water. All the different elements."
Predictably, a majority of seniors do not want to pay more taxes.
Jack Enkemann, 81, of Gainesville said proposed changes like this one are very hard on seniors who live on a fixed income.
"We're on private pensions and they just don't go up. We just have to absorb that," Enkemann said. "We don't have a way to get a second job to offset the increases."
Nash Williams, 81, of Gainesville said when he retired, he chose to stay in Georgia because of the changes Perdue was making at the time.
"Florida was really appealing from a tax point of view," said Williams, referring to Florida not collecting a state income tax. "However Perdue was looking at increasing the deductions we were going to get. If that's all wiped out, there's not going to be any more retirees coming to Georgia."
Other seniors are jaded by the idea of having more of their income taxed.
"Every dollar I have I've already paid taxes on. How far do they want to go with retirees?" asked David McDowell, 76.
Williams said it's hard to hear politicians considering ideas that will impact a lifetime of work.
"We tried to do the right things and be independent when we retired and not rely on the government. We made our plans throughout our lives to do that, and this is not helping us too much," he said.
The 10-member tax council, appointed during the 2010 legislative session by 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.