Look for your Voters Guide to the election in Sunday's print edition of The Times.
Georgia voters will decide whether to cap the state’s income tax rate at 6 percent when they head to the polls Tuesday.
The referendum is seen by many as a first step toward reducing the rate and perhaps one day zeroing it out altogether.
“But it’s got to be done in increments,” said state Rep. Carl Rogers, R-Gainesville. “It can’t be done in one fell swoop.”
However, critics say a cap is a slippery slope to increasing sales taxes, a more regressive system that disproportionately hurts middle- and low-income families and minorities.
“If the legislature decides they need more money and income tax is capped, they’ll raise it through sales tax, or worse, something like the new vehicle tax, neatly designed to let the poor support the rich,” said David Vogel, a Democratic candidate for the Georgia’s 9th District U.S. House seat. He faces Republican incumbent Doug Collins on Tuesday’s ballot.
About half of state revenue comes from personal and corporate income taxes.
All three gubernatorial candidates — incumbent Republican Nathan Deal, Democrat Jason Carter and Libertarian Andrew Hunt — said they support the cap.
Proponents argue a cap will give greater assurances to businesses looking to expand or relocate to the state.
Georgia’s individual income tax rate ranks in the middle of the pack nationally, but is higher than some neighboring states: Alabama’s top rate is 5 percent; Florida has no income tax; Tennessee taxes only investment income; and North Carolina’s top rate is 5.8 percent.
Only South Carolina, with a top rate of 7 percent, is higher than Georgia in the region.
Mike Ryan, an economics professor at the University of North Georgia, said these facts “could be an unfavorable signal to businesses ...” adding that reducing the tax rate has the potential to expand the tax base with new economic development, thereby offsetting any losses in revenue.
In addition to tax policy, businesses are largely focused on a state’s infrastructure and education system when evaluating whether to expand within or relocate to a state, Ryan said.
State Sen. Butch Miller, R-Gainesville, said it’s important to begin looking at drawing down the income tax rate, but cautions it must be done one bite of the apple at a time “because you always want to be aware of the unintended consequences.”
Kansas’ similar effort might be a case study in unintended consequences. Income tax rates there were slashed in recent years, and state revenues fell $334 million short of projections at the end of the 2014 fiscal year in June.
Proponents, however, argue that sales and consumption taxes are fairer than income taxes.
The average rate of state and local sales in Georgia is 7 percent, including in Hall County, according to the Georgia Budget and Policy Institute.
Dewey McClain, a Democratic state representative from Lilburn and president of the Atlanta North Georgia Labor Council, an AFL-CIO affiliate, said revenue losses from a reduction in the income tax rate will mean significant cuts to services — everything from public safety to education to health care — that would hit Georgia families hard.
According to Wesley Tharpe, an analyst at the GBPI, about 80 percent of Georgians will pay higher taxes if the state income tax is one day eliminated in lieu of increased sales taxes.
Opponents also argue a tax cap will hamstring state government in times of fiscal emergencies.
“The economic challenges Georgia may face in the future cannot be anticipated,” said Frank Lock, chairman of the Hall County Democratic Party. “A tax cap as described ... has the potential to handicap the state economically.”