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Georgia tax reform council still crunching numbers, ideas

By Maria Saporta

It was an interesting juxtaposition.

As President Obama’s bipartisan debt reduction commission was presenting its ideas on how to reduce the nation’s staggering deficit on Wednesday, Georgia’s Special Council on Tax Reform and Fairness was meeting to talk about the proliferation of tax incentives for businesses.

In both cases, one thing has become painfully clear. It sure is easy to spend and give away money, but it’s a lot harder to take away government incentives or duct back programs once they’ve been established.

That’s why the President’s commission appears unlikely to receive the desired 14 out of 18 votes in support of the deficit-cutting proposals by its Friday deadline.

And that’s also why Georgia’s special council is still having to wrestle over policy issues and recommendations it will present to House Speaker David Ralston by early next year.

Council Chairman A.D. Frazier apologized to those in the audience listening to the various opinions among the members saying it was like “watching sausage being made.”

Much of the division centered on whether incentives should be used to sweeten the pot for investment decisions “in play” — (where Georgia is competing with another state on a desired economic development project); or whether they should be made available to any existing or new Georgia company that’s adding jobs.

Again, the multi-million dollar issue is that someone has to end up paying for all the incentives that are granted.

It didn’t get any better when he asked if people in the audience meeting at Mercer University’s Atlanta campus had any questions or comments.

One person suggested scrapping the entire state income tax for individuals and corporations and moving just to a consumption tax.

Frazier quickly responding that such a move would be quite risky because half of the state’s revenues are generated from those income taxes.

Gov.-elect Nathan Deal campaigned on reducing the state’s 6 percent corporate income tax by a third.

But the state’s corporate income tax doesn’t appear to be a big factor on whether companies choose to expand or invest in Georgia.

Someone close to the council said that in public hearings across the state, business executives and representatives have not expressed concern over Georgia’s corporate income tax rate. So in a state facing its worst budget shortfall ever, does it make sense to give a tax break to a sector that really doesn’t seem to care one way or another?

What is obvious is that the council still has lots of work to do before it will be able to present ideas on how Georgia can revise its tax system in a way that is fair and effective while also stabilizing the state’s financial situation.

“We have some serious numbers crunching to do,” Frazier said after the council’s meeting. But he acknowledged that they’re working under a tight deadline. “We will be completed before the first day of legislative session.”

Frazier said he expected that the council would need to meet at least one more time before it presents its report, but he said that no meeting has yet been scheduled.

Maria Saporta

Maria Saporta, Editor, is a longtime Atlanta business, civic and urban affairs journalist with a deep knowledge of our city, our region and state.  Since 2008, she has written a weekly column and news stories for the Atlanta Business Chronicle. Prior to that, she spent 27 years with The Atlanta Journal-Constitution, becoming its business columnist in 1991. Maria received her Master’s degree in urban studies from Georgia State and her Bachelor’s degree in journalism from Boston University. Maria was born in Atlanta to European parents and has two young adult children.

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2 Comments

  1. Frank Keller December 5, 2010 12:04 pm

    This council needs to realize the economic devastation in Georgia caused by exemptions. All exemptions that apply to sales taxes and the property tax should be abolished immediately. When the rates of taxation are rolled back to reflect the increased revenue—Georgia will have solved the economic problems that plague our state.

    When/if Georgians realize the devastation caused by these exemptions—-We will handle the proponents of exemptions in the same manner that rabid animals are now dealt with.Report

    Reply
  2. Jean McRae December 6, 2010 7:37 pm

    Farmers fare well in the Georgia Tax Reform Council.

    Tax council chairman delivers good news to Georgia farmers

    By Aaron Gould Sheinin

    The Atlanta Journal-Constitution

    JEKYLL ISLAND — The head of the state’s special tax study committee told nearly 1,000 Georgia farmers Monday that his panel will recommend eliminating the tax on energy used in agriculture.
    * Tax council chairman delivers good news to Georgia farmers

    The message from A.D. Frazier was greeted by resounding applause from those attending the 72nd annual Georgia Farm Bureau convention.

    Gov.-elect Nathan Deal, in his first appearance before a major state organization since his election Nov. 2, also made brief remarks, seeking the farmers’ help in solving the state’s financial problems.

    Frazier’s own short comments, though, drew the most attention

    “Any tax on a farmer is a burden because we don’t make anything anyway,” said Hugh Veal Jr., who grows corn, hay, soybeans and wheat in Wrightsville.

    Adding that that his county property taxes had increased 32 percent last year, Veal said, “We can’t afford any more expenses.”

    The General Assembly created the tax council earlier this year and charged it with reviewing the state’s entire tax code and recommending changes to make it simpler and fairer. The committee’s report is due by the time the Legislature returns to session Jan. 10.

    Frazier also said he and Deal discussed eliminating the tax on their flight to Jekyll Island.

    “Because that was the one thing it seemed like we heard everywhere that was still missing and needing correcting,” Frazier said.

    Besides eliminating the existing energy tax, Frazier said the panel would also recommend maintaining the tax exemption on agriculture inputs, which are materials and goods used for farming and other agricultural industries.

    “We’re not going to give out all our recommendations here today,” Frazier said. “But those two I wanted to let you know we heard you.”

    Lawmakers will give the panel’s recommendations an up-or-down vote, and Deal must sign any plan before it becomes law.

    The governor-elect spoke in general terms Monday about the state’s budget crisis, and he asked the Farm Bureau to help identify ways to save money.

    “We approach the transition process and my charge to the transition committee has been this: First of all, figure out if there is duplication of services and efforts. If there are duplications, let’s try and eliminate the duplications. Let’s consolidate services when that can be done. Hopefully you’ll see some of that.”

    Deal said that “Republican rhetoric” about a belief in smaller government and reduced spending “has a great opportunity to be put into place.”

    With a budget hole estimated to be more than $1 billion, Deal said he and lawmakers are going to have to act to make cuts, although he offered no specifics.

    “Those are the realities of the world in which we live,” Deal said. “I think that is an all together appropriate thing to assume that posture. During the last few weeks we have been going through a transition period. I’ve been amazed how big state government really is.”

    Deal also spoke briefly about education, promising to work to make sure children can read at an appropriate level by the age of 8.

    “We spend an awful lot of money trying to rehabilitate a child beyond that age if they never achieve the ability to read appropriately,” he said. “I believe we should spend the money on the front end.”

    The goal for education, he said, is to help children land good jobs. More importantly, he said, is that those jobs be in Georgia.

    “We spend that money and educate our children, we sometimes lose sight of the fact that we don’t want that money to go to waste by sending our children to North Carolina or California or other parts of the country simply because they can’t find a job right here in our state,” Deal said. “We don’t want to go to the trouble of educating them simply to make them better citizens for other states. I want them to be able to stay in Georgia.”

    But it was Frazier caused the biggest buzz in the convention hall.

    “He said exactly what we were seeking to hear,” Georgia Farm Bureau President Zippy Duvall said.

    The energy Ralph Caldwell uses, such as propane to heat his chicken houses in Heard County, is already exempt from sales taxes. Frazier’s recommendation would extend the exemption to fuel used in crop production, such as gasoline or diesel to run tractors.

    Caldwell is worried, however, about word from the tax panel last week that it would study eliminating or adding a sunset date to all the state’s existing exemptions.

    “If there is a sunset on tax exemptions, that would then become a new tax on us,” Caldwell said.

    He estimates it would cost him at least $5,000 a year in sales taxes on propane alone. He said he spends about $70,000 a year to heat his 15 chicken houses.

    Lawmakers at Monday’s convention, however, said Frazier’s recommendations will likely give the entire package of changes — few of which have been announced — more support in the Legislature, especially from lawmakers in rural counties.

    “He probably just got a couple of votes,” said Rep. Ellis Black, R-Valdosta.

    Eliminating the tax on energy “is the whole ballgame,” Black said.

    Georgia is one of only a few Southern states that now have a tax on energy used in crop production. Eliminating it will make Georgia more competitive, said Rep. Lee Anderson, R-Grovetown.

    “We’re trying to make it where businesses want to come to Georgia,” Anderson said, “not just look at coming to Georgia.”Report

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