Tax Justice Digest stories about Georgia

Attack of the 50 Foot Tax Breaks

April 4, 2008 5:02 PM | Permalink

Conservative commentators frequently depict Hollywood as ridden with leftists, but the reality is that, when it comes to tax policy, the movie industry is no different from any other. Take recent legislative activity in Michigan and Georgia, for example. Michigan Governor Jennifer Granholm is on the verge of signing a bill that would, among other things, provide a refundable tax credit equal to 42 percent – 42 percent! – of a film production’s costs. The Georgia Senate has adopted a measure – also expected to be signed into law – that will more than double that state’s current film production credit.

Yet, as an important new report from the Massachusetts Department of Revenue (DoR) documents, states may receive precious little in return for these enormous investments. According to the report, Massachusetts will lose upwards of $140 million between 2006 and 2008 due to its film tax credit, but may receive only about $20 million in new revenue from the economic activity associated with the credit. What’s more, as the report notes, “any estimate of the net economic and tax revenue impact of tax incentives needs to take into account the reduction in state government spending” associated with such credits. In such tight budgetary times, that “reduction in government spending” is sure to occur if policymakers keep trying to lure the latest blockbuster to their state.

Georgia Legislature: Tax Cutting Frenzy Part II

March 21, 2008 4:45 PM | Permalink

We told you last week the Georgia House was all in a flutter over property tax cuts including caps and repeal of the state's car tax. With only a handful of working days left on the legislative calendar, Senate Republican leaders this week pushed through a tax cut package of their own which includes a 10 percent cut in income tax rates over five years. Estimates are that eventually the state would lose more than $1.2 billion a year. Despite mountains of evidence that tax cuts don't pay for themselves or stimulate the economy (one need only look at the fiscal situation on the federal level to understand this) Senators are billing the income tax changes as a "stimulus plan." The Georgia Budget and Policy Center has a new analysis showing the damaging impact this cut would have on the state.

Poorly Reasoned and Poorly Targeted Property Tax Reductions are Gaining Steam

March 14, 2008 5:06 PM | Permalink

This week in the Georgia House, lawmakers voted overwhelmingly (166-5) to approve property tax cuts, including the elimination of the state's car tax, that will cost the state more than $750 million when fully phased in. Republican Speaker Pro Tem Mark Burkhalter doesn't seem concerned with offsetting the lost revenue. Responding to concerns about the plan’s price tag, he says, "It's very simple. You cut taxes, the economy grows. The economy grows, Georgians prosper. The best way to stem off any recession is to cut taxes. Not to clam up, go home and wait for the storm to pass." We've learned on the federal level that tax cuts simply don't pay for themselves, but clearly legislators in Georgia want to try their own experiment with this flawed (and dangerous) economic myth. The House-passed bill contains another misguided property tax change – a 2% cap on annual increases in a home’s value for tax purposes (the cap would be 3% for businesses).

The Georgia Budget and Policy Institute issued a report adding up the costs of the state House's handiwork related to taxes this year and found that the tax bills passed this session would cost as much as $113 million in FY 2009, $473 million in FY 2010, and $798 million in FY 2011.

Coincidentally, the Oklahoma Senate passed a proposed constitutional amendment last week also dealing with caps on increases in a home's taxable value. In this case, the cap would be decreased from 5% to 3% (the 5% cap would remain intact for businesses). Assessment value caps of this sort have recently received much attention in Florida. The unfair way in which these caps provide the greatest relief to long-time residents (creating vastly different property tax bills between neighbors with similar houses) recently drove Florida residents to amend their constitution to patch over the problem in a very imperfect way.

Rounding out the recent trend in debating poorly reasoned property tax cuts is Arizona, where the House narrowly approved a measure to permanently repeal a portion of the property tax that is currently suspended. Allowing the tax to take effect again would raise about $250 million annually for the state, significantly reducing the projected $1.2 billion revenue shortfall for the current fiscal year. If the plan passes, cuts in public services could be the result.

Victory in Georgia: The So-Called GREAT Plan Is Defeated

March 7, 2008 5:01 PM | Permalink

Georgia taxpayers dodged a substantial bullet this week. We've been following for months now Georgia's GREAT Plan and its various modifications. Originally the "Georgia Repeal of Every Ad Valorem Tax" would have repealed virtually all Georgia property taxes and replaced the lost revenues by expanding the state's sales tax base. The tax fairness and budget implications of such a regressive and costly plan did not sit well with many observers and lawmakers.

The bill's main proponent, House Speaker Glenn Richardson, eventually gave up the fight for the original bill. The bill then morphed into a cluster of property tax proposals including the freezing of assessed property values and capping local property tax revenues. (For more on the specific provisions take a look at the Georgia Budget and Policy Institute's fact sheet here). Recently, GBPI's Director Alan Essig had an editorial in the Atlanta Journal Constitution titled, "Have Responsible, Not Reckless, Tax Reform."

It seems that more than a few lawmakers agreed with Essig. In a victory for tax justice advocates, the newer version of the GREAT Plan was defeated in the Georgia House this week by a vote of 110 to 62, ten votes short of the 120 needed to pass.

Plea for Reasoned Reform in Georgia

February 22, 2008 4:34 PM | Permalink

For many tax justice advocates, Georgia has been a state to watch. House Speaker Glenn Richardson's "Georgia Repeal of Every Ad Valorem Tax" (GREAT) Plan, which would have repealed the state's property tax and replace the lost revenues by expanding the state's sales tax base, appeared to be doomed to fail this legislative session. The Plan faced numerous political road blocks and would have caused an $8.6 billion budget hole for the state according to Georgia State University's Fiscal Research Center. Yet there were many remaining questions regarding how much political capital the Speaker was willing to invest to make his plan a reality. Seeing the writing on the wall, the Speaker is now moving full speed ahead with a Plan-B .

His new proposal would eliminate just the state portion of the property tax in favor of an expanded sales tax base. The legislation also includes a troubling property assessment cap. (Residential assessed values will only be allowed to increase by 2 percent annually.)

A new report from the Georgia Budget and Policy Institute (GBPI) explains the problems with the legislation, which would create a budget shortfall of $827 million and increase the regressivity of the state's tax structure. In an Atlanta Journal-Constitution op-ed, GBPI executive director Alan Essig writes, "Low- to middle-income Georgians already pay a higher percentage of their income in state and local taxes. Swapping property taxes for more sales taxes will only make it worse." He goes on to plead for a reasoned approach to property tax reform while simultaneously making the case for investment in public services. "The speaker's proposals won't keep Georgia moving forward. In fact, his risky ideas for reform would set the state back for generations. What we need is a reasoned plan for reform that adds up and provides adequate revenue while putting in place a fair tax system for all Georgians." We couldn't agree more.

States React to Economic Turmoil

February 15, 2008 2:27 PM | Permalink

Many states are in a fiscal crunch and the number of states facing budget shortfalls may be growing. This week the Center on Budget and Policy Priorities released a state fiscal update saying that, "At least twenty-five states, including several of the nation's largest, face budget shortfalls in fiscal year 2009." A sluggish economy, bursting housing bubble, and the decline of tax revenues have all had a significant impact on states and their ability to keep budgets balanced.

It's not always clear that states can act as effectively as the federal government to kick start a sluggish economy, but that doesn't stop them from trying. For any legislation to be effective as a stimulus to counteract a recession, it must be "temporary, timely and targeted," as argued by the Center on Budget and Policy Priorities. Some of the stimulus initiatives being proposed on the state level meet these goals better than others. Tax cuts that are not temporary can do more harm to states in the long-run, and provisions that will not have any benefit until after a recession has passed are useless as a stimulus. Most importantly, those tax cuts not targeted towards low- and middle-income people are not likely to result in new spending that immediately spurs the economy, but will go largely towards savings, which takes much longer to have a positive effect.

Stimulus Plans in the States: Connecticut, Iowa, Georgia, and Ohio

In Connecticut, Governor Jodi Rell has asked legislators to reconsider their economic stimulus proposals, arguing that there is no money available to pay for tax cuts. Senate Democrats there proposed increasing the state's property tax credit by $250 and House Republicans proposed offering tax credits to offset medical and energy costs. It's certainly not obvious that an increased property tax credit is well-targeted, since property-owners tend to have higher incomes than everyone else. Depending on how it's implemented, it may not be timely either.

Policymakers in Georgia have proposed legislation to expand the state's personal exemptions temporarily. The legislation is targeted to the degree that it benefits middle-income people, but it doesn't reach those too poor to pay state income taxes. It's also flawed because it's not entirely timely. A lot of people won't benefit until next year.

Some Iowa lawmakers have adopted a completely different approach to providing economic stimulus by proposing a five-year property tax break for Iowans who improve their homes. According to one state senator, the tax break "really rewards all homeowners that have pursued the American dream of owning their own home." But a five-year tax break does not qualify as temporary, at least for the purpose of responding to a recession. It's also hard to believe that it would be targeted to those who need help and will spend the extra money right away, and it's not clear that any home improvements that result will happen quickly enough to qualify this as timely. Another idea being tossed around is a proposal that would expand the state's sales tax holiday to include all items subject to the sales tax. ITEP has long argued that sales tax holidays are not good policy. In this context it's worth noting that they are usually not targeted well at all, since the benefits go to everyone who shops during the sales tax holiday and because people who need help the most are less capable of shifting the timing of their consumption to take advantage of it.

Ohio Governor Ted Strickland isn't proposing increased tax credits. Instead, his plan includes borrowing $1.7 billion in an attempt to stimulate the state's economy and create 80,000 jobs. If approved by voters, more money would be available for transportation, renewable energy technologies, and local infrastructure projects. Borrowing to fund important investments makes sense in some contexts, but as a stimulus it's unclear whether these investments will give a timely boost to the economy to counteract a recession that is occurring now.

State of the States Roundup

January 18, 2008 3:12 PM | Permalink

Georgia

Georgia Governor Sonny Purdue is singing the same old tired song in this year's State of the State address. In this year's rendition he proposed eliminating the state portion of property taxes levied and removing the tax on retirement and investment income for seniors. Georgia already has a large exemption for retirement income on the books and the state portion of property taxes levied is so small that Georgians would likely see an average tax cut of $30. On a positive note, the Governor didn't endorse House Speaker Richardson's plan to eliminate the portion of property taxes levied to fund schools -- a step in a dangerous direction that Richardson says will eventually lead to the elimination of all property taxes.

Proposal to Abolish Property Taxes Scaled Back in Georgia

December 7, 2007 4:16 PM | Permalink

In Georgia, the radical plan to abolish property taxes and hike sales taxes, proposed earlier this fall by House Speaker Glenn Richardson, is shrinking by the day. Last week, Richardson pared back his proposal so that instead of repealing all property taxes, the plan would "only" repeal all homeowner property taxes for schools (plus the annual "car tax" Georgians pay on their motor vehicles), and would pay for the change by taxing personal services.

The plan still raises worrisome questions, however. Georgia already allows large state-funded (and local-option) homestead exemptions and other tax breaks for fixed-income families. If further residential property tax relief is necessary, a state-funded "circuit breaker" tax credit would be a better-targeted (and less expensive) option than outright repeal of all homeowner school property taxes. (Circuit breakers are provisions that prevent property taxes from exceeding a certain percentage of a family's income.) And expanding the sales tax base to include services, while a shot in the arm for a sustainable sales tax, would make Georgia taxes even more regressive unless accompanied by low-income tax breaks of some kind. As the Georgia Budget and Policy Institute has pointed out, a state Earned Income Tax Credit could be an important part of this mix.

Plan to Abolish Georgia's Property Taxes Faces New Roadblock

October 22, 2007 1:19 AM | Permalink

Georgia House Speaker Glenn Richardson's plan to repeal all Georgia property taxes and make up the lost revenue by expanding the state and local sales tax base ran into a roadblock last week. Two new reports from Georgia State University's Fiscal Research Center (FRC) show that repealing property taxes would dig an annual $8.6 billion budget hole for the state -- and that under any reasonable scenario for expanding the sales tax base, a property-for-sales tax swap would fall at least $2 billion short of filling that hole. Since Richardson has described his plan as "revenue neutral" without actually providing detailed revenue estimates, the new reports cast doubt on whether this tax swap can be accomplished.

As the FRC report's detailed revenue estimates make clear, the only way such a plan could even approach revenue neutrality would be to tax items that (to put it mildly) wouldn't find much support among the public or tax analysts, including purchases by the federal, state and local government ($2.2 billion), health care ($600 million), and rent ($405 million).

Richardson helpfully suggested this week that the authors of the reports "should sharpen their pencils," but didn't offer more substantive criticism of the FRC analysis.

Even worse for advocates of this tax swap, the latest data show that Georgia sales tax collections in September were down 10% from last September's collections, which is not a good sign for those who want to use sales taxes to pay for property tax repeal.

Georgia's GREAT Plan is Anything But...

September 14, 2007 1:22 AM | Permalink

Georgia Speaker of the House Glenn Richardson's Georgia Repeal of Every Ad Valorem Tax (GREAT) Plan would eliminate the state's property tax and replace the lost revenues by expanding the state's sales tax base. The plan is receiving lots of attention that Rep. Richardson probably doesn't like. For starters, media around the state are asking hard questions including this one from the Athens-Banner Herald, "How long is he willing to hold on to an idea that is already all but doomed to fail?" According to the Atlanta Journal Constitution Governor Sonny Perdue also has doubts about the GREAT Plan becoming law.

The Speaker has been traveling around the state discussing his plan and advocates for tax fairness and adequacy aren't letting his tour go unanswered. The Georgia Budget and Policy Institute along with AARP Georgia, the Georgia Association of Educators, The Georgia Municipal Association, the Georgia School Boards Association, and the Georgia Coalition United for a Responsible Budget are also touring the state and visiting nine cities to educate the public about the state's tax and budget situation.

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