Say no to the GREAT big tax

Georgia GOP House Speaker Glenn Richardson was upset when he saw his property tax bills, which totaled over $13,000. Richardson has a plan to avoid paying those taxes. He calls it the GREAT Plan, which stands for Georgia Repeals Every Ad Valorem Tax. (No one said he could spell.)

Currently the county collects ad valorem taxes on the value of our homes, cars, boats, barns, trailers and other big valuables. Those who drive a BMW and live in a mansion pay more than those who drive a Geo and own a 3-bedroom house. These taxes support our local government and schools.

Richardson’s proposal strips these funds from the county. Schools and local governments will have to go to Atlanta for every dime. The state will raise the funds through a sales tax on everything imaginable. Not only will we pay sales tax for fuel, clothes, cars and houses. We will also pay tax on bread, milk, medicine, and doctor visits.

The additional sales tax will cost Georgia businesses their competitive edge. Shops located near state lines will be impacted first. The revenue we currently enjoy from Tennessee, Alabama and Florida residents will evaporate.

Even Georgians will try not to buy here. No one wants to pay more when they can simply cross the state line (or log onto the Internet) to save money. People with means will buy everything from auto parts to clothing from out-of-state companies. The poor, who must buy locally, will be cut deepest by Richardson’s scheme.

As sales fall, the legislature must raise the tax rate to replace the lost revenue. As the tax rises, sales will fall more, and the tax must be raised higher – which will cause sales to fall even more, and so on. It’s a death spiral for the economy.

Even if the legislature holds the state sales tax at 4%, we end up paying a much higher tax because each item is taxed multiple times as it moves through manufacturing and distribution channels. You see, goods for resale will no longer be tax exempt.

The GREAT big tax deals Georgia manufacturers a devastating blow. Manufacturers who pay sales tax for raw materials and supplies cannot possibly compete with untaxed manufacturers in other states. Many will limp across state lines and reestablish business there – leaving behind empty buildings and thousands upon thousands of lost jobs.

Businesses that remain in Georgia will source their goods from manufacturers in other states, unless Richardson figures out how to tax interstate commerce. This will further boost the economy in surrounding states and further depress Georgia.

We can speculate that Richardson will issue exemptions to companies who have his favor. He is already wavering on whether raw materials will be taxed. Last week, Richardson announced that there would be a cap on sales tax charged for business-to-business transactions. The cap may be anywhere from $100,000 to $500,000 per vendor. The caps will give large Georgia businesses an edge over their smaller competitors, since smaller businesses pay sales tax on every purchase.

Expect to see sales tax incentives offered to foreign manufacturers as enticement to locate in Georgia, selling out our heritage to other countries.

Lt. Governor Casey Cagle (a Republican who is actually conservative) opposes the hare-brained GREAT tax. “This is not a tax cut,” Cagle recently noted.

In fact, it is a tax increase. Richardson is already claiming that there will be a 10% surplus over current tax revenues. That means his plan is a 10% tax increase.

Cagle says, “It is a tax shift, as it has been represented. And so the question becomes now, who are you shifting the tax burden to?”

The GREAT big tax shifts the burden onto the elderly, renters, college students, and small and medium businesses. It provides relief for millionaire property owners like Richardson and for large businesses.

Under the current tax system, the elderly are exempt from the school tax, reducing their tax burden to less than a third. Under the GREAT big tax, there are no tax breaks for the elderly. They shoulder an unfair proportion of the taxes on prescriptions and doctor visits. They also pay taxes on bread, milk and lawn services.

Renters also bear an unfair burden. Renters currently pay property taxes through their rent. Although the GREAT tax supposedly eliminates property taxes, out-of-state renters will pay a property tax of up to $2,000. Richardson disingenuously calls it a “fee” rather than a tax.

The fee-payers may include thousands of college students. This will discourage out-of-state students from enrolling in our colleges. Since these students pay higher tuition rates, the loss of this income could devastate our colleges.

Cagle goes on, “And it appears, under the current proposal, that there would be winners and losers in that structure, but more importantly, potentially it would put Georgia in a competitive disadvantage for businesses versus other states. And that gives me great heartburn.”

Cagle says businesses tell him the GREAT plan will increase their tax burdens at least 25%, and as much as 62%. That’s a very steep rate of inflation which will be passed along to Georgia consumers.

When you penalize consumers for buying Georgia goods, they respond by spending less money in this state. The economy stagnates, and jobs are lost. Bankruptcy courts will be bloated. Houses will be foreclosed on every street. People with education and opportunity will leave Georgia to find work elsewhere – leaving behind only the richest Georgians, and a class of working poor. This is the vision some Republicans have for Georgia.

There is a better solution for rising property taxes. According to Alan Essig, executive director of the Georgia Budget and Policy Institute, property taxes for local governments have been essentially flat (as a percentage of income) for the last fifteen years. There is one exception: school districts’ tax rates have grown rapidly.

The school tax increase goes right back to Republican policies. Over the past several years, Republicans have robbed Georgia schools of over $1.5 billion. In areas where education is valued, local school boards respond to the cuts by requiring more from local property owners. As Essig says, “The locals have been reacting to what the state has done.”

The solution to property tax growth is quite simple: Make the Republicans give the school money back to the schools. Every dollar our schools receive from the state budget is a dollar that we do not have to pay in property taxes.

The GREAT big tax is a potential disaster for the elderly, renters, small and medium businesses, Georgia colleges, and employees. The good news is: We can stop it! The GREAT big tax cannot be implemented without an amendment to the Georgia Constitution. Amendments require approval by two thirds of the General Assembly, and then a majority vote at the next election.

If our legislators are foolish enough to pass this amendment, Georgia citizens can still vote NO to the GREAT big tax – and then vote out the legislators who favored it.