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Editorial: Other states have eliminated income tax, and with careful study maybe Georgia can, too
Georgia's state Capitol in Atlanta. - photo by Associated Press

The Georgia General Assembly reconvenes for its annual session on Monday, and as often is the case in an election year, a lot of high-profile issues are expected to be discussed before the final gavel after the traditional 40 working days.

The upcoming session is expected to include debate on everything from legalized gambling to teacher pay raises to concealed-carry gun laws.

One of the most sweeping pieces of legislation to be discussed this year has already been filed by Gainesville Sen. Butch Miller, who in November put forth a proposal to abolish the state’s income tax.

Efforts to eliminate state income taxes are under way in other states as well, and the cause is a popular one for Republicans this year. In Georgia, others have lined up behind the idea being championed by Miller, who is running for the office of lieutenant governor.

Miller’s legislation is as simple as legislation can get. Barely more than a page long, it simply calls for repealing the entire section of Georgia law that deals with income taxes and replacing it with wording to say that as of Jan. 1, 2023, no income taxes will be collected at the state level.

Though simple, the bill filed in advance of the session’s opening would have enormous consequences, and would require additional legislation of a more complex variety to address how to replace revenues from the existing tax.

As a concept, we support Miller’s proposal. There are long-term potential benefits to eliminating the state income tax, and states that have done so have, in general, benefited economically from the move.

But the abolition of the income tax cannot stand by itself; there has to be additional action taken to replace at least some of the revenue now being generated by the tax, and the details on that side of the legislative ledger will determine whether the effort to stop state income taxes in Georgia will ultimately make sense.

From a philosophical standpoint, taxing income is a disincentive to work and to save. When you know that a certain portion of every dollar you earn is going to be taken from you by an income tax at a rate over which you have no control, and that the same is true for profits you may make from investments or savings, it reduces the motivation to work those extra overtime hours, to start that new enterprise, to push yourself into that next tax bracket.

It is a tax over which you have no control. You can’t decide how much or how little you pay; state law determines that. Income taxes are generally considered to be “progressive” in that the more money you make, the more taxes you can afford to pay, which in effect is a punishment for success.

Conceptually, abolishing the state income tax makes sense for a lot of reasons. Realistically, the debate over alternative revenue options to replace portions of the income tax is going to have to accompany the movement to make the change.

Georgia’s state income tax generates more revenue for state government that all the other major taxes combined. If that tax is abolished, other taxes are going to have to be raised for the state to continue to function.

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But it is important to note here that the state doesn’t necessarily need to replace all of the income tax. State government is enjoying a significant surplus of funds; returning some of that money to the people and reducing the tax dollars being collected should be part of any such tax reform.

In most discussions about elimination of income taxes, the most likely tradeoff is an increase in consumer taxes, such as the existing state sales tax. Raising consumer taxes is almost a given if the income tax goes away, but the question becomes how much can you realistically increase such taxes.

Consumer taxes are generally referred to as “regressive,” in that they have a disproportionate impact on those who are on the lower end of the wage scale, thus the need to consider exemptions for certain necessities such as food and medicines when considering higher consumer taxes. They may also have a negative impact on those on fixed incomes and retirees, who may not see as much of a benefit from removal of the income tax.

Remember though, that if state income taxes are abolished, disposable income increases, so there is more money to spend on consumer goods and consumer taxes. And you get to decide for yourself what you can afford as a consumer, dictating what you pay in taxes, rather than having the government managing your tax burden for you.

Finding the right balance between an appropriate increase in state sales taxes and other consumer fees, and debating what should be exempted from those taxes, are the sorts of details that demand a lot of legislative study and discussion before becoming reality.

Increases in consumer taxes are particularly effective in areas which draw lots of tourists, as visitors leave behind tax money the state otherwise would not have collected. From Atlanta to Savannah, the mountains to the Golden Isles, Georgia’s tourist industry is among the top in the nation.

The revenue details must be resolved if the income tax is to be abolished. No one is pretending otherwise, despite the cries of doom and gloom that already have surfaced from those convinced the sky is about to fall upon the people of Georgia.

If the revenue side of the picture can become clear, there are advantages to elimination of the state’s portion of the income tax.

Nine states, including Florida, Tennessee and Texas, have figured out how to make it work. Studies such as the 2018 “Rich States, Poor States,” done for the American Legislative Exchange Council, indicate those that have abolished state income taxes have benefitted with more overall growth, better paying jobs, and more wealth and economic strength. The council is a nonpartisan organization of state legislators dedicated to the principles of limited government, free markets and federalism.

In the increasingly competitive market for good jobs, offering companies and entrepreneurs a state without an income tax is certainly a positive inducement, as it is for those in high income brackets, or looking for a place to retire.

We can only imagine how the elimination of the state income tax might benefit huge areas of rural Georgia desperate for job growth and economic stability. Those areas do not enjoy the same standard of living as those residents in its metropolitan areas.

It is not likely the General Assembly will vote in the coming session to abolish the income tax, but the discussion related to doing so needs to be had, the studies on revenue alternatives need to be conducted, and the groundwork needs to be laid to make it happen at some point in the not-to-distant future.

Surely if our neighbors Florida and Tennessee can figure it out, we can as well.