On March 4, 2015, the Cherokee Ledger-New .Com posted an article about the More Take Home Pay Act, a bill introduced into the Georgia House of Representatives last week by State Representative John Carson of Marietta. This bill is designed to reduce income taxes and move toward a consumption tax model by increasing sales taxes.
The article cites Carson as saying that our state ranks as the “ninth worst state for income tax” and the 36th state for business climate. We also have the “fourth-highest unemployment rate in the country,” as of December 2014. These abysmal statistics are evidence that changes need to be made to boost our state’s economy.
Georgia is overdue for real tax reform. In January 2011, the Special Council on Tax Reform reported on extensive input it had gathered from a multitude of sources around the state. It reviewed Georgia’s tax code and concluded that the code was too riddled with special interest benefits and recommended movement towards more taxation of consumption, less on income, and greater transparency.
The More Take Home Pay Act is a step in the right direction by ratcheting down Georgia’s income tax rate. After years of minimal change in the Georgia tax code, it’s the first piece of legislation with real substance designed to accelerate Georgia’s growth. It also eliminates many of the exemptions and credits that special interests have worked into Georgia’s needlessly complex tax code over the years.
Georgians for Fair Taxation (GFFT) would like to see the state income tax go to zero and the revenue made up by a broader sales and use tax at the lowest possible rate. A prebate for all households to reimburse the tax on necessities would be an additional improvement, but Carson’s proposed legislation at least gets us headed in the right direction.
The income redistribution argument relies on the mantra that our biggest economic problem is the income disparity between the rich and everyone else. This gap is often exaggerated because it doesn’t include the benefits being received by US households through government transfer payments. Regardless of the size of the gap, the best way to improve one’s lot is to get a better job. The more jobs that are created, the more wages tend to rise. It’s basic supply and demand.
The concept of taxing the evil rich to give to others discourages job creation. Overall economic growth is critically needed. In the last downturn and the continuing malaise, the poor and middle class suffered more than the rich as jobs evaporated. As unemployment swelled, wages stagnated. People gave up on seeking employment and left the civilian workforce entirely.
The less tax that’s placed on investment and productivity by any level of government in Georgia, the more attractive we become to job creators – the people who start and grow businesses. Conversely, income taxes cause entrepreneurs to flee. They not only transport themselves but also move the jobs of their employees with them. That’s why states with high income taxes such as New York and Illinois are seeing businesses and workers flee elsewhere. Have you seen those TV ads appearing on Atlanta televisions trying to woo businesses to NY? What’s their selling point? Lower business taxes.
Income tax is a subsidy by law-abiding citizens for the benefit of those who aren’t. Criminals who make their money illegally don’t report their income. Nor do those who legally don’t exist. They don’t file income tax returns. However, they do buy things and thus pay sales taxes. If you’re incapable of arresting them, at least don’t subsidize their enterprises.
Income tax is rife with fraud. Only last week the Georgia Department of Revenue reported that it’s seen an uptick in fraudulent filings. TurboTax, the best-selling tax preparation software in the US, recently announced it was temporarily suspending the processing of state income tax returns because the number of suspected fraudulent returns was overwhelming. Income tax fraud is the new frontier for identity thieves. In contrast, sales taxes are paid every day in small increments and collected at fewer points than there are households paying income tax. The incentive to cheat on sales tax is less rewarding to the thief. Plus the state already has sales tax collection and auditing processes in place to root out noncompliance.
Any income tax is a tax on productivity. To create value, it’s necessary to produce things that are valuable to someone else, whether they be goods or services. We live in an increasingly global marketplace in which our ability to produce things competitively will determine our level of wealth and not just for the top 1%. You can’t have too large a portion of the population living on government transfer payments and maintain a healthy economy. The labor participation rate has been on a steady pattern of decline for more than a decade. Taxing work doesn’t help reverse this trend.
Georgians for Fair Taxation (GFFT) is a non-partisan, grassroots, all volunteer organization. No one in our organization is paid, nor is it supported by any particular business, industry, or self-serving mogul pulling strings from behind a curtain. We are very much against the government picking winners and losers in the private sector. Small business in particular suffers from the burden of income tax because its complexity requires expertise that many small entrepreneurs just don’t have and can’t afford. Nor do they have an army of lobbyists to plead for the kind of special treatment that infests our current tax code.
GFFT welcomes supporters from both sides of the aisle. We believe that creating an attractive, competitive environment in which businesses can thrive is what’s needed to help more Georgians across the economic spectrum to thrive. It’s not more taxation of their income that they need to improve their lives. It’s more encouragement to unleash their productive capacity.