Georgia taxes: New report contends “Fair Tax” would hurt hurt – not help – families, businesses, economy

By David Pendered

A report released today on Georgia’s tax structure fuels a debate over proposed tax reform that advocates are increasingly pushing for the 2014 session of the state Legislature.

Tax cuts do not lead to job creation, according to the report by GBPI. Credit: GBPI

Tax cuts do not lead to job creation, according to the report by GBPI. Credit: GBPI

The Georgia Budget and Policy Institute issued a tax analysis that contends the proposed “Fair Tax” reform would raise taxes on and hurt Georgia’s “families, businesses, communities and the economy.”

The report follows a promise made last month by an advocacy group that said it would help convince Georgia voters to approve a fair tax. The campaign would be similar to the one it waged in favor of 2012 charter school amendment, according to Americans for Prosperity.

“Winning the public over involves a strategy that, I think, would be akin to the strategy that we and other groups that worked on the charter school amendment [used],” said Virginia Galloway, president of Georgia chapter of Americans for Prosperity. “That is, getting out there in front of the people, making sure they understand the facts.”

At issue is the long simmering debate over how to change Georgia’s tax code.

The current debate is framed around the idea of replacing income taxes with a sales tax. The concept goes by various names, including fair tax and flat tax.

The GBPI report appears to push back against the facts as presented by some advocates of a desire to change the state’s tax code. The author said the proposed tax changes have consequences that haven’t been fully discussed and that Georgia lawmakers should not be wooed over by the lastest tax fad.

“In short, we think these tax-shift plans would be negative for families, businesses and the overall Georgia economy,” said Wesley Tharpe, the GBPI who wrote the report. “They would lead to budget cuts in education, degrade the quality of life in Georgia as well as its economic prospects.”

The 21-page report from GBPI was underway before the state Senate Fair Tax Study Committee met July 17.

Galloway testified before the committee, as did Kelly McCutchen, president and CEO of Georgia Public Policy Foundation.

McCutchen began his comments by noting that Georgia’s per capita income now ranks 40th in the country, according to a report by the University of New Mexico. Georgia’s ranking has been trending downward since at least 1990, when it ranked 29th. Georgia ranked as high as 24, in 1995.

“This isn’t just a bad headline,” McCutchen said. “This is bad news for our families. … The more we tax savings and work and investment, the less economic opportunity we have for the American Dream.”

Galloway informed the committee that Georgia’s economic competitors are gaining momentum through policies that include changes to their tax code. For example, Galloway said, the North Carolina General Assembly this year replaced “one of the highest” income taxes in the nation with a flat tax.

“They got together this year and pushed it through, using a number of groups including Americans for Properity – North Carolina,” Galloway said.

Tharpe contends the model adopted in North Carolina is not a good one for Georgia to follow.

“The most important thing to do is have Legislature drop it as latest tax fad, and look at more comprehensive review of tax system as a whole,” Tharpe said.


David Pendered, Managing Editor, is an Atlanta journalist with more than 30 years experience reporting on the region’s urban affairs, from Atlanta City Hall to the state Capitol. Since 2008, he has written for print and digital publications, and advised on media and governmental affairs. Previously, he spent more than 26 years with The Atlanta Journal-Constitution and won awards for his coverage of schools and urban development. David graduated from North Carolina State University and was a Western Knight Center Fellow. David was born in Pennsylvania, grew up in North Carolina and is married to a fifth-generation Atlantan.

14 replies
    • colinvalenta says:

      Burroughston Broch The FairTax is much better however.  Our current system started as a flat tax and look where it has gotten us.  At the state or national level the FairTax can completely transform an economy for the better.  Let’s just hope another country doesn’t adopt it first.Report

  1. LanceH says:

    How about sharing with your readers the background of the GBPI.  As best as I can tell from it’s Board of Directors and many papers published, it is a Democrat leaning advocacy group trying to pass itself off as a non-partisan group.Report

  2. jbennettatty says:

    The graphic is misleading. As with smoking, higher taxes are bad for you. There of course will be some smokers who outlive some non-smokers, but would you want to advise your children on that basis that smoking is good for you? Would you want to your state lawmakers that higher taxes are good for the state? As long as budgets can be balanced, lower taxes are better over the long haul.Report

  3. JeffersonBauer says:

    You can’t truly compare a state sales tax to the Fair Tax (national sales tax).  The Fair Tax has a prebate system.  It has economic advantages that would drive business into the country along with offshore capital.  If passed I believe the states would have more incentive to follow a sales tax approach over the income tax.Report

  4. moliere says:

    Most of the people who support the Fair Tax do not realize that A) it would raise their taxes and B) it will reduce spending on the programs that they support. The Fair Tax is so popular only because most people feel that the opposite is true: it will cut their taxes, reduce spending on the programs that they dislike, or failing that at least one or the other. The truth is that the folks who support this will wind up with a higher tax bill, lower spending on the programs that they support while the programs that they oppose will generally remain funded at their current levels. 
    Also, to list North Carolina’s tax plan as a “success” when it was just passed is ridiculous. Wait 10 years, when we see their budget picture, their ability to grow their own jobs, their ability to attract new jobs, and their ability to meet their needs in law enforcement, infrastructure, transportation and education (things that generally will not be provided by the private sector) and then tell me how successful it is. I am not going to say that it won’t succeed. I am saying that calling it a success merely because it was enacted is pure ideology, making the flat tax the ends and not the means. If that is your position, fine, but don’t claim that it is a success at driving economic growth and making the state a more business-friendly environment until it actually happens.
    Finally, the people who talk about flat taxes and lowering taxes and using right to work laws to keep wages down are good for the economy because they attract employers are wrong. What it does is get declining companies and stagnant industries to relocate some of their non-essential (meaning lower paying with fewer opportunities for advancement) positions to your area as a way to cut costs and stay in business. To use the old business cliche, you get horse and buggy and coach whip makers (or more accurately the people who do the lowest paying, least skilled tasks in building horses, buggies and coach whips) looking to cut costs for a few years until they inevitably fold or get Bain Capital to come in and liquidate them. Meanwhile, the areas that have a highly skilled, well trained and well compensated workforce not only produce the engineers, managers and marketers to grow their own auto industries that put the horse and buggy coach whip people out of business, but also the private equity guys who will handle their liquidation. If low taxes were the major driver, then Bain Capital would be located in Forsyth County – or better yet in Oxford, Mississippi – instead of Boston. But Boston is able to produce – and attract – the people capable of doing the high level finance work needed at places like Bain Capital that Forsyth County can neither produce or attract, and a flat tax isn’t going to change that. 
    And that brings us back to North Carolina. One of the main reasons why that state has grown the past 30 years, becoming Georgia’s single biggest economic rival in the process, is due the growth of its own finance industry. It is no Boston (or New York or Connecticut or Los Angeles) in finance but it was doing quite well and as a result brought a lot of high paying jobs to the state. That happened because North Carolina created a rather strong education system that produced a lot of top finance talent. They grew their own finance jobs, plus a lot of major financial institutions located their regional operations there, bypassing the likes of Tennessee, South Carolina, Alabama, north Florida and yes Georgia (who is a lot better in engineering/technology than finance … except that North Carolina has a booming engineering/technology sector too) in the process. So let’s see if North Carolina is still producing the best finance talent in the deep south (apart from maybe south Florida) in 10-15 years and exploiting that talent to grow and attract those boatloads of high paying jobs. If they are then maybe we can call it a success.Report

    • colinvalenta says:

      moliere You’d have to elaborate on how the FairTax raises taxes or reduces spending.  The FairTax in principle is designed to be revenue neutral.  Calculate a percentage needed to maintain revenues and enforce it.  Since the FairTax will reduce compliance costs and lower evasion it can potentially lower the over all tax burden for everyone.  Create a prebate and the tax is also very progressive.  
      Also the flat tax is much different than the FairTax, there’s no comparing.Report

    • colinvalenta says:

      JeffersonBauer Exactly.  The FairTax at the national or state level is designed to be revenue neutral.  Calculate the percentage required and put into place.  It’s simple.  More misunderstanding of the best thing any state or our national government can do for the economy.Report

  5. colinvalenta says:

    The fact that this study refers to tax cuts and its effects on job creation demonstrates they do not understand the FairTax.  The FairTax is a revenue neutral tax and there are no tax cuts.  It’s too bad that the FairTax has so much misleading negative reviews from left leaning groups.  I assume it is because it takes power out of their hands and returns it to the people.  The FairTax makes transparent to the public the tax dollars being collected by their government and puts an end to special interest groups and crony capitalism.Report


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