This summer, Georgia’s Special Council on Tax Reform and Fairness for Georgians began its five-month mandate to examine our state’s tax code and recommend a path forward.
With their mission nearing completion and taxes becoming a key election-year issue, I believe the Council must focus its energies on long-term and sustainable solutions for a healthy fiscal future.
The most important thing the Council must consider is sustainability. Our state’s economy is struggling, unemployment continues to hover around 10 percent, and the blame for this cannot be placed fully on national economic problems.
Indeed, our state’s economic problems were all too obvious even before Wall Street took a nose-dive in 2008. The most significant problem: A lack of sustainable budget planning.
Our state’s tax code, in whatever new form it eventually takes, must be relevant and fruitful today, ten years from now, and into the next generation.
There are a number of good ideas that can save our tax code, provide the necessary revenue to help our state grow, and, most importantly, keep taxes low for working Georgians.
First and foremost, we must change our sales tax collections policy, an idea I first introduced in 2009.
Currently, when you pay sales tax on, for instance, a new toaster, the state collects that sales tax and then, a month or more later, sends your county’s share back. Not only is this inefficient, it also creates a bureaucratic monopoly for the Department of Revenue as the only entity that can collect sales taxes.
My proposal is much more sensible – simply give county governments the right to collect sales taxes locally, either by doing it themselves, outsourcing that work to a private sector business, or allowing the Department of Revenue to continue collecting revenue in that county.
My proposal not only makes the system more efficient and gives counties a choice in how they run their affairs, it also raises more revenue without raising taxes one dime.
Every year, the Department of Revenue leaves hundreds of millions of dollars on the table in the form of uncollected sales taxes. In states where private sector firms have a hand in collecting sales taxes, this isn’t a problem, and I believe that until we change the outdated way in which sales taxes are collected, we continue to cheat ourselves out of sales taxes that you’re paying, but which fall through the cracks.
Beyond reforming sales taxes, we also desperately need income tax reform. Plainly put, our income tax brackets haven’t been significantly updated since the 1930s. It’s time to have the political courage to change that.
If we were to raise the rate by just 1 percent on people making over $1 million per year, we would bring in millions more to the state’s strapped coffers, while reducing the tax on nearly 90 percent of our working families.
Finally, we need to simplify our corporate tax system, and make certain that it protects and prioritizes small business owners. Healthy small businesses are vital to a healthy economy.
I suggest that, instead of throwing away millions of your dollars on tax breaks for huge out-of-state corporations, we instead invest that money in helping small businesses get a break on their taxes.
Along with that, we need to carefully and thoroughly audit the corporate tax breaks already in place, to see if they’re actually creating jobs and capital investment, or just costing us money we don’t have. We need to get rid of the ineffective ones and expand the revenue-enhancing tax breaks.
The truth is, Georgia’s tax system is broken, and it has been for a long time. The last few years of myopic and selfish budgeting haven’t helped matters, and now our state is at the precipice of financial catastrophe.
Only sound, common-sense, and sustainable policy can pull us back from the brink.
[Rep. Virgil Fludd (D-Tyrone) serves in the 66th House District. District 66 includes parts of Fayette and Fulton Counties in south metro Atlanta. He serves on the Banks and Banking, Regulated Industries, Small Business and the Ways and Means Committees. Rep. Fludd is also Chairman of the Fayette Delegation and Co-Chairman of the Working Families Caucus.]
