Leaders in the Georgia Senate say they have a plan that will reduce the amount individuals pay in income tax and possibly eliminate it altogether. However, the architect of the plan warns taxpayers that the plan is still in its infancy.
Unlike the FAIR Tax plan proposed by conservatives as a way to end the national income tax, Senate President Pro Tempore David Shafer of Duluth’s proposal doesn’t include special tax breaks for low-income individuals.
“That’s open to discussion as we go along,” he told the Florida Times Union. “This is just the starting point.”
Shafer is sponsoring two constitutional amendments for changing the state’s basic tax policy.
If voters approve, Senate Resolution 415 would prevent the legislature from raising the state income tax and SR 412 would require that any increase in the state sales tax go toward lowering the income tax.
“This is to start the shift from an income tax to a consumption tax,” he said.
Because they can’t go on the general election ballot until next year, Shafer has shown no rush to pass them in the nine days remaining of this year’s session.
While his proposals won’t automatically cut the income-tax rates, “They are the framework,” he said.
Critics argue raising the sales tax hurts the poor because a larger share of their income must be spent on goods that would be subject to sales tax. Plans like the FAIR tax and others that eliminate state income tax have traditionally raised sales tax to compensate for the loss of income tax revenue to the state.
The Georgia Senate is two-thirds Republicans and all of them are co-sponsoring the amendments. The House, however, is one vote short of two-thirds GOP majority, which means a Democrat or the House’s lone independent would have to vote for the plan.
When asked on Monday about the amendments, House Ways & Means Chairman Mickey Channell said he wasn’t familiar with them and couldn’t offer an assessment of how his panel would view them.
Nine governors are calling for the elimination of income taxes in their states. The Times Union reports that Georgia leaders have wanted to do it since Republicans took control of the state 10 years ago.
“The real issue is economics. You shouldn’t tax things you want more of,” said Kelly McCutchen, president of the market-oriented think tank Georgia Public Policy Foundation.
Actually cutting or eliminating the income tax is tricky because it brings in half the revenue the state uses for operations. McCutchen said raising the sales tax from 4 percent to 6 percent, eliminating some deductions and raising the personal exemption to benefit the poor would allow for cutting the income tax by half.
The state of Florida is one of a handful that has no state income tax.