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Here comes another bid to end state income tax

Posted: July 24, 2013 - 12:03am

ATLANTA — Television viewers know summer is a time of reruns. Now Georgia’s Republican legislators, in what looks like a rerun, are trying to end a major state tax.

The last state to drop its income tax was Alaska, and they got rid it after striking oil. Now, instead of paying taxes, every Alaskan gets a check from the state, courtesy of oil profits.

Then-Gov. Sonny Perdue wanted to get rid of Georgia’s income taxes, but economists told him he first needed to build up a large cash reserve for the transition. That reserve ended up being used to cushion the state in recession.

Then-House Speaker Glenn Richardson pushed a plan to get rid of property taxes. That was defeated by local officials worried about ending their main source of revenue, with little faith the state would replace it.

The most recent failure was in 2010 when Speaker David Ralston and Senate leaders appointed a commission to devise a way to get rid of income taxes. When the commission hatched its plan in secret and then delivered it to the legislature, the loud thud was it falling lifelessly to the floor.

Now, various junior GOP legislators from the House and Senate have come up with legislation to end income taxes. A Senate study committee met Wednesday to build momentum.

Several witnesses bloodied from the last effort offered the senators their impressions.

“I think the big problem in that package was secrecy,” said Virginia Galloway, executive director of Americans For Prosperity. “The people of Georgia distrusted it from Day One because they felt like they were in the dark.”

She recommended getting various grassroots organizations involved in crafting any new proposal.

Christine Ries, a Georgia Tech economics professor who was part of the 2010 reform council, agrees credibility was missing.

“As academics and as politicians, you all know our level of trust in the community is not real high right now,” she said. “You can go out and tell people, ‘We’ve got the numbers. We’ve done a study. We promise you we’re going to stick to this. We’re going to actually keep lowering rates.’ You can tell them all you want, but all the time people would just say, ‘I don’t believe you. I don’t trust you. I don’t trust them.’ That’s the environment. It doesn’t seem to be getting better.”

That distrust, according to Ries, is because Georgians who see their personal tax bill increasing with the immediate prospect of a broadened sales tax don’t believe they’ll eventually benefit from either reduced income taxes or any type of economic boost.

One way to combat that was an online simulation she created called www.TaxReformTheGame.com that allows players to see the impact on state revenues from adjusting the rates of various taxes. However, it doesn’t show the impact on either the economy or personal tax situations.

Ries plans an upgrade that will accelerate the economy as income taxes are lowered.

It wasn’t just individuals who complained last time. Many businesses and professions currently exempt from the sales tax also objected.

“With tax reform, you’re going to have winners and losers. On balance, there will be more winners,” she said. “The problem is people don’t get it. ... People who think they’re going to be losers are going to scream loud and long. They will use all types of arguments to mark the fact that the people who are winners are immoral and trying to hurt the poor.”

One group critical of the last proposal and cool to the new version so far is the Georgia Budget & Policy Institute, an Atlanta think tank supportive of greater spending on social services. Wesley Tharpe, a policy analyst who is following the issue, predicted Republicans will cut spending on services to minimize the political impact of the transition to more sales taxes.

“Most families, or lower- or middle-income people, would see their taxes rise under this type of plan,” he said, adding that claims of greater overall prosperity from reduced income taxes are unproven.

And so, the debate is back where it was three years ago. Whether the current backers of eliminating the income tax can clear the political obstacles remains to be seen.

More likely, the players on both sides of the issue will merely dust off their scripts from last time.

(Reach Walter Jones, the Atlanta bureau chief for Morris News Service, at walter.jones@morris.com or (404) 589-8424.)

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