Dear Legislator:
On behalfof the National Taxpayers Union’s (NTU’s) more than 8,200 members in Georgia, Iwrite to express support for recent proposals to reduce and flatten the state’sincome tax rates, but to also raise some concerns about the plan’s potential lackof revenue neutrality at the beginning of implementation as well as proposalsto increase the cigarette tax and impose an excise tax on communicationservices. These recommendations are contained in a report from the SpecialCouncil on Tax Reform and Fairness forAll Georgians.
Several parts of the Special Council’sblueprint would put Georgia on the path to a simpler, fairer, and pro-growthtax system. Through painstaking research and numerous public hearings, theCouncil learned how Georgia’s antiquated and distorted revenue-raisingstructure has discouraged saving and investment, while giving the governmentthe ability to pick winners and losers. With these findings, the Council hasformulated several solid plans for reform that, if implemented, will benefitthe state.
Among the positiverecommendations is a proposal to reduce the personal and corporate income taxrates. The report calls for the elimination of the current six tax brackets anda substantial reduction in the personal income tax (from the current highestmarginal rate of 6 percent) over time. The Council envisions a rate that doesnot exceed 4 percent in 2014, at which point the income tax changes should (bythe Council’s estimates) be revenue neutral. Additionally, the report calls forthe corporate income tax rate to maintain parity with the personal income tax.Flattening, simplifying, and reducing the income tax rates will help spurinvestment, lead to more job growth, and provide more revenue stability.
Although NTU supports the income tax reductions, there are severalaspects of the Council’s report that, in our view, are problematic fortaxpayers. We are concerned that the plan’srecommendation of an income tax rate higher than the revenue-neutral level of 4percent for several years after the plan’s adoption would lead to substantiallyhigher tax collections, an outcome that we cannot support because it is notfair for taxpayers. Furthermore,a flat communications service excise tax fails to take into account the uniqueaspects of how each service is delivered. Communications taxes differ becausethe communications technologies themselves differ in how they interact withpublic resources. Satellite television, for example, does not utilize publicrights of way, so imposing a 7 percent tax on over one million satellitetelevision subscribers in Georgia to pay for something they don’t use makes nosense. Additionally, theproposal to increase the cigarette tax is misguided because it candisproportionately harm the poor and small retailers without raising theprojected revenue. Such has been the case in numerous places, among them NewJersey and the District of Columbia.
Georgians are counting on theirelected officials to remove obstacles to an economic recovery, and burdensometaxes are among the most daunting of them. A tax reform plan should work to stabilize revenue and reduce theoverall tax bite, not increase it. While NTUwould gladly support a tax simplification bill that does not add to existingburdens, we simply cannot support an approach that leads to heavier taxloads on hard-working Georgians. Therefore, our members urge you to pursuechanges that make the plan revenue neutral, including scrapping thecommunications and cigarette tax proposals.
Sincerely,
John Stephenson
State Government Affairs Manager
Cc: Governor Nathan Deal