Category: Tax Reform

Tom Price Speaks! (On austerity)

A day after he became everyone’s favorite future Majority Leader, Rep. Tom Price gave a speech at the Heritage Foundation. Price compared reactions to the 2008 crisis among Western nations and found “America’s impending fiscal crisis can be attributed to two primary problems: anemic economic growth and compounding entitlement costs.” He went on to advocate the tax and entitlement reform packages you’d expect. It’s unlikely this was written specifically to position himself after last night’s news, but it does showcase the orthodoxy and wonkishness that makes him popular with most factions of the Republican coalition.

Wednesday, June 11, 2014

Price Speech at the Heritage Foundation

WASHINGTON, D.C. –  Congressman Tom Price, M.D. (GA-06), vice chairman of the House Committee on the Budget, delivered a major fiscal policy address today at noon at the Heritage Foundation in Washington, D.C. Read more

The Campaign to Prevent an Income Tax Rate Increase Starts Now

In addition to the high-profile Governor and Senate races in November, Georgia voters will decide on a constitutional amendment that prevents any increase in the state’s income tax rate. That’s the result of Senate Resolution 415, sponsored by President Pro-Tem David Shafer.

Earlier today, 17 Georgia economists chimed in with their endorsement of the measure. From a press release:

“We endorse Sen. David Shafer’s Senate Resolution 415 amending the State Constitution to prevent any increase in the maximum state income tax rate.

“Sen. Shafer’s constitutional amendment gives Georgia a competitive advantage in attracting new jobs and businesses and in persuading existing businesses to expand, as it provides a large and important measure of long-run certainty in Georgia’s business environment.

“We also endorse future tax reforms that would lower Georgia’s income tax rate in order to be more competitive with our neighboring states and reduce the tax burden paid by Georgia’s citizens.”

The list of economists supporting the measure is below the fold.
Read more

Hey Georgia General Assembly: North Carolina Is Trying To Kill Their Income Tax Too

Taxes suck.  We hate ’em.  Well, some wish they could pay more, I’m sure (email me if you’d like to pay my taxes for me…I’ll send you my P.O. Box where you can send your checks), but we generally just don’t like to send our hard-earned dollars to the government coffers.  Georgia is sandwiched betwixt two states who currently don’t levy income taxes on residents:  Tennessee and Florida.

Now North Carolina Republicans in the legislature are working to ax their state’s income tax:

State Sen. Bob Rucho, a Mecklenburg County Republican and chairman of the Senate Finance Committee, said Wednesday that he hoped to use the 2015 legislative session to eliminate the state income tax, replacing it with a consumption-based sales tax to make up for the lost revenue.

“That’s a direction we’d like to go,” Rucho said in an interview as the state Senate adjourned for the year. Rucho said it was impractical to push for such a steep cut during a short session the legislature holds in even-numbered years, but that cutting the income tax was a top priority of his when the legislature reconvenes for its biennial full session.

North Carolina’s income tax accounts for about 61 percent of state revenue, Rucho said. But the revenue stream has been choppy in recent years, given the impact of the recession. The uneven results on a year-over-year basis can play havoc with annual budget planning in a state that requires a balanced budget, and it’s something Rucho said he wanted to avoid.

Both Senate President Pro-Tem David Shafer (R-Duluth) and Senator Josh McKoon (R-Columbus) sponsored bills to phase out the income tax in Georgia in the most recent General Assembly session.

h/t: Drudge Report

Fair Tax Tuesday

From this morning’s Peach Pundit Daily (click here to subscribe):

Tax Reform Coming Next Year? We’ve heard that one before, but this time it may be serious. State Rep. Tom Kirby (R-Loganville) told the Chattanooga Times Free Press that 2014 may be the year to “kill off Georgia’s income tax.” Have fun storming the castle! Bonus: the article also mentions “Tax Reform, the Game” put together by Christine Ries, an economics professor at Georgia Tech.

You also might want to listen to this edition of Coffee and Markets. They talk to Wayne Allyn Root about his book “The Ultimate Obama Survival Guide.” One of his suggestions is to move to a State with no income tax. Indeed three of the top five and six of the top ten fastest growing cities in America are in States with no income tax.

Discuss.

Tax Reform Wednesday

Rather than just talk about the Fair Tax, let’s talk about major tax reform. Here’s an article to kick-start the discussion.

The simplification effort should extend beyond paring tax expenditures from the code or standardizing overlapping provisions that create confusion. Rewriting the tax code also needs to assure that similar kinds of economic activity are treated consistently, eliminating incentives to select differing organizational forms based on tax, rather than economic conditions. Fortunately, the discussion has evolved over the last two years and is no longer dominated by big corporations clamoring for lower statutory rates and repatriation of overseas earnings. The tax writers, particularly Mr. Camp, have recognized that reform needs to encompass both individual and business code provisions in order to achieve fairness and minimize tax avoidance. I would further suggest a thorough examination of what is tax exempt, an issue I don’t see getting any attention. Recent months have seen vocal advocacy of a robust charitable deduction. Fair enough. A far bigger issue is establishing the proper line between what is deemed for profit or not-for-profit under the code. As a leader at one prominent Indiana tax-exempt organization said to me recently, “Not-for-profit is just a tax status, not a way of doing business.” The continuing drift towards tax exemption can only lead to erosion of the revenue base at a time when we need the money.

Discuss

Tax Reform Bills Coming To The Forefront In The Legislature

Georgia may be on its way to some meaningful tax reform. The first glimmer of hope was in Senator Josh McKoon’s (R-Columbus) SR 8 which would cap the state income tax at 5.5% in 2016 and then reduce it by 0.5% every year until the rate is zero.

Comes now Senate President Pro-Tem David Shafer (R-Duluth) with two bills in hand. Those bills, SR 412 and SR 415, are proposing amendments to the state constitution: to limit the state sales tax rate and provide a proportional reduction of the state income tax in the event the sales tax is increased and to provide a cap on the state income tax rate, respectively.

In an article by Jim Galloway, Senator Shafer indicated that this would draw a path for our state to ween itself off of the income tax:

“This creates a path for us to move from the income tax to the sales tax,” the Senate president pro tem said this afternoon. The income tax currently accounts for about half the state’s tax revenue.
Other uses of the sales tax by local governments would be grandfathered in, but in essence, the state government would be laying primary claim to retail sales as a future funding mechanism.

This is a step in the right direction towards meaningful tax reform in our state. I look forward to see if these amendments wind up on Governor Nathan Deal’s desk and, ultimately, put on the ballot for voters to consider.

#FairTaxFriday Is Back!

With the convening of the 113th Congress, newly-introduced legislation abounds.  Not quite so new is the reintroduction of the FairTax legislation, originally introduced by now retired Congressman John Linder, by Congressman Rob Woodall (R-GA-7)…Congressman Linder’s successor.

The Hill has a story about the bill, but here’s the synopsis of the bill:

Specifically, the bill would repeal the payroll tax, individual and corporate income taxes, the self-employment tax, and estate and gift taxes.

It would be replaced with a 23 percent consumption tax that people living at or below the poverty rate would not have to pay. The bill would require a “probate” to be paid to all residents that is equal to the consumption tax the poor would normally pay, thus sparing them from taxes completely.

Among the 53 Republican co-sponsors are House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.).

Consider this your late #FairTaxFriday thread.  Discuss among yourselves why you like or dislike the FairTax.

A Taxing Challenge: Brick-and-Mortar vs. Click-and-Mortar

The Internet has revolutionized civilization. It’s medium has provided a new way in which to communicate and conduct business with our fellow man. E-commerce has ramped up heavily since the early 2000s and poses an interesting challenge to state governments in collecting sales taxes on purchases made online.

Right now, you’re supposed to file the sales tax due from online purchases on your Georgia income tax, but I’d say that few people actually know they’re supposed to do that and much less actually do. HB 386, passed this most recent session, changed the law for online retailers that have a physical presence in the state to include affiliates. You probably notice that some online shops that have a physical location in Georgia charge you sales tax if you’re a Georgia resident.

The arguement is that many people shop online retailers to avoid state sales tax and, in turn, hurt small brick-and-mortar businesses in Georgia. I’d say that’s partially true (not so much after you pay 5 or 6 bucks for shipping…depending on where you shop), but not true in every case. I generally shop Amazon to find better prices on products, or just to find products that I can’t find in my area.

Comes now, a ruling from a federal court out west that strikes down a similar law in Colorado:

The law had already been temporarily blocked in federal court last year, but U.S. District Judge Robert Blackburn’s ruling Friday permanently handcuffs it.
“I conclude that the veil provided by the words of the act and the regulations is too thin to support the conclusion that the act and the regulations regulate in-state and out-of-state retailers even-handedly,” Blackburn wrote in his opinion.
The law and the rules to carry it out “impose an undue burden on interstate commerce” and are unconstitutional, the judge wrote.

From reading the Colorado law, it sounds like the burden is placed upon the business who does not collect sales taxes to send the Colorado customer a tax document each year with the amount of goods purchased and the amount of tax due to the state. Failure to comply results in a $5 fine per infraction. It doesn’t appear that Georgia’s law will be as burdensome towards businesses in that respect, but it does make you wonder if the Amazons and other online retailers of the Interweb world will try to use the federal court ruling as precedent to strike down this portion of HB 386.

The AJC has an article on the tax bill here.

Gov. Deal on “dynamic scoring” and a static budget

At an event the other night, the Governor opened the floor to questions and someone asked him about repealing the sales tax on energy used in manufacturing. The Gov. said that the “cost” of the tax cut was roughly $170 million, but that he thought they could identify enough savings to make it feasible.

“I read that we’ve lost $1 billion worth of jobs,” asked the gentleman who offered the original question. “Don’t we make enough in taxes on those jobs to pay for the tax cut.” That sounds like a no brainer but it’s a bit more complicated than that.

“Dynamic scoring” is a budgetary concept over which Congress has been fighting for years. Dynamic scoring includes changes in behavior that are expected from proposed tax cuts. For example, if we exempt the sales tax on Porsche automobiles, we expect more to be sold, and we might anticipate additional income tax from new salesroom jobs.

So in the example of the sales tax on energy used in manufacturing, a dynamic scoring model would include additional income tax revenues from jobs attracted to Georgia, or less income tax lost to jobs moving to other states.

But Georgia uses a static model for budgeting that doesn’t account for anticipated changes that ramify from tax cuts. So we must find a way to “pay for” tax cuts in a down economy like we currently experience.

I recognize that we may have gotten into the weeds on a technical budgeting issue, but I hope there are enough policy wonks among our readership that this little segment was worth producing.

The Battle to Control the Georgia Senate, Round 2

It’s a nasty political fight with no-holds barred and kicking, biting, gouging and low blows galore – and no Democrats are involved. It’s the battle for control of the Georgia Senate. Following the national example, Georgia Republicans formed a circular firing squad last year and commenced firing and never slackened until the session was over.

English: This is a picture of Lt. Gov. Cagle t...
Georgia Lt. Governor Casey Cagle - Image via Wikipedia

The past few peaceful months for the combatants have been spent re-loading and apparently preparing for further embarrassment in 2012. One indicator is that the sales of red rubber noses, big floppy shoes and frizzy orange wigs have skyrocketed. When the Georgia Senate convenes with Lt. Governor Cagle as its nominal head, the appropriate theme music will be Send in the Clowns.

The only thing protecting Cagle and various Georgia Senators is the relative lack of attention paid by Georgia citizens and the fact that most Georgians neither know nor care who these people are. If the people of this state stop long enough to study the sorry mess that calls itself a legislative body then all bets are off in the local and state elections.

While The Columbus Leger-Enquirer has an excellent interview with Georgia Lt. Governor Casey Cagle, touching on many subjects of interest, the real news is not in the headline. The real news is Cagle’s take on the continuing power struggle between himself and the majority of the Georgia Senate. From the story:

The Senate will continue to operate under a leadership structure implemented last session that forces Cagle to share power with other GOP leaders, but Cagle maintains that he is still head of the chamber.

Read more

Consumption Tax For Georgia?

It’s time for Fair Tax Friday Wednesday. Yesterday Walter Jones wrote about study by Mark Rider, an Econ professor at Georgia State. Rider says a consumption tax would work well for Georgia.

For one thing, the government could have a steady revenue stream that would reduce the temptation to either raise taxes in a recession, cut services or lay off government workers. That’s because consumption amounts to a steady 60 percent of the economy when food and medicine are taxed.

Consumers’ money would go further, too, he argues, since there would be no tax cascading as there is on the current retail sales tax. That’s where a product gets taxed at several steps in its production and the end price has to reflect each tax on top of tax. Ending tax cascading would also result in wages rising faster than inflation, he argues. Plus, it would reduce the cost of compliance because there’d be no need for hiring accountants to complete income-tax forms.

He also addresses one of the major objections to a consumption tax from liberals. They consider such a tax to harm those with low incomes because they have to spend a greater portion of their money on necessities than the rich do. Rider makes two points about that. First, he said refunds to the poor could give them everything they had paid in taxes. Second, if the rich spend money from either their savings or investment income, they’ll be taxed, and so they would wind up paying more than the poor that way, too.

Rider admits the plan is not without problems:

The biggest stumbling block for Rider is how to keep out-of-state goods and services out while letting capital in. Goods from Alabama and Florida, and wherever eBay is, would skate around the tax through the mail, countless highways or UPS.

Read Rider’s report here.

Discuss.

Mandatory House GOP caucus meeting this morning – UPDATED

House Republican Caucus members have been instructed to call into a mandatory conference call at 10am. The reason for the call is unclear, but it likely deals with the much maligned tax reform proposal.

We’ll keep you up to date as more becomes clear.

Another angle to this is that the looming shutdown of the federal government could also have an impact on the yet-to-be-approved state budget, which is currently in conference committee where House and Senate negotiators are working out disagreements.

If the government shuts down the loss of a substantial amount of federal dollars (Tenth Amendment!1!!) could have an impact on the budget process here in Georgia. They may decide to suspend the rest of the session until the budget issues are resolved at the federal level.

That’s just a thought of what this could all be about.

[UPDATE] The meeting dealt with the tax reform plan. Some other changes have been made to the proposal, though it is unclear what was change. And as has been known, the proposal will come to the floor on Monday.

Freshman Republicans in need of primary challengers

In covering the drama in the Senate today, Jim Galloway mentioned a meeting on Monday, arranged by Senate Majority Leader Chip Rogers, where some freshman met with the Governor to ensure that tax hikes would be shot down:

Today’s turmoil in the Senate had a precursor. On Monday, we understand that several freshmen Republican senators met with Gov. Nathan Deal to discuss his lack of support for a restoration of the state sales tax on groceries, and a cigarette tax increase.

They apparently didn’t believe their Senate Republican leaders, who had told them that Deal had promised to veto either of those tax increases. (We’ll ascribe the best of motives to the freshmen, and suppose that they wanted to see tax cuts in other areas.)

Deal assured the new senators that he had indeed promised such a veto. Things still did not go well. One of the freshmen declared to Deal that they would go ahead and pass the sales taxes. If the governor chose to veto them, they would override him next year.

Whether they wanted corresponding tax cuts in other areas is unclear, but sources indicate that they weren’t pushing for that.

So who are the freshman GOP Senators pushing these tax hikes?

It’s my understanding that Ginn offered Deal the courtesy of a veto override.

Tax Council’s Plan Introduced In House.

It’s HB385. Chris Joyner reports:

Channell said legislation passed last year required the bill closely reflect the tax council’s plan. Now legislators serving on a special joint committee will try to find something that can pass both chambers, he said.

Channell said every one of the council’s recommendations likely will not be in the final bill. “At the end of the day, we are going to have to have a consensus,” he said.

House Minority Leader Stacey Abrams, D-Atlanta, serves on the committee and said she is ready to discuss the plan in detail. But she said she expects the final bill “will reflect the goals and the opinions of the majority party.”

Peaches for Thought: Obamacare, Early Voting, and an Unlikely Alliance

Today’s “fresh political pickins from the Peach State”:

1.) Coming off a bitter campaign, Governor Deal and former Governor Barnes have forged an unlikely alliance over a good cause: ensuring that spouses of state employees killed in the line of duty are able to continue health coverage under the state’s plan. Read more