Your Georgia Desk:
Tax Code Simplification
April 15th is an annual deadline that many Georgians dread. All year long, we work hard to earn an honest living in order to pay our mortgages, household bills and provide for our families. Whether you overpaid your taxes and get money back, or you get surprised yet again learning you still have not paid enough, April 15th is an annual reminder that navigating our complex tax code and challenging tax structure is costly and burdensome. The time is now to simplify the tax code, lower the tax burden and empower people with more economic freedom.
Higher taxes and more government regulations limit economic growth and discourage job creation. A heavy tax burden and a complicated tax code take hard-earned money from individuals and families and harm our businesses limiting savings, investing and personal spending. A heavy tax burden also takes money otherwise available to businesses limiting their growth, reinvestment and job creation. In the end, states that have lower taxes are more attractive locations for businesses looking to relocate or expand operations. These state also attract and keep talented professionals looking to raise their family.
Reforming or simplifying Georgia’s tax structure is not a new concept. In fact, it’s an issue that has been at the forefront of the Georgia legislature’s priorities for many years. Although the Georgia General Assembly passed tax reform legislation in 2012, our tax structure is remains outdated and needs to be simplified. The 2012 legislation was a big step and benefits many; however, we still have a long way to go. Georgia must be constantly vigilant in considering ways to lower the state tax burden on individuals and businesses if we want to remain competitive. Perhaps the biggest change that should occur is a simplification and ease of Georgia’s heavy reliance on income tax revenue. Some economists believe this to be a major disadvantage to Georgia’s future economic growth.
The Georgia State Senate recognized the mounting need for bold and innovative tax reform and established the Senate Fair Tax Study Committee in 2013. I was proud to not only sponsor the enabling Senate Resolution but also to Chair this important committee. Last year the study committee held three public hearings listening to testimony both in support and opposition to a proposed state Fair Tax structure. Experts from the Georgia Institute of Technology, the Fiscal Research Center, Americans for Prosperity Foundation, Fair Tax-Georgia, Georgia Budget and Policy Institute, American Legislative Exchange Council, Georgia Public Policy Foundation, and the Heartland Institute all offered testimony, presented data and answered questions. A lot was learned
about viable improvements to our tax code while keeping state revenues up and continuing current government services.
Several common threads appeared about Georgia’s dependence on the personal income tax. First and foremost, taxing productivity, savings and investments penalizes Georgians who are most responsible with their own money and often create jobs for other people. Also, the complexities in the current state income tax system, including its numerous exemptions interfere with the normal supply and demand for goods and services. A simplified system, therefore, would not only return economic freedom to Georgians, but also makes complying with the tax code easier. With simplification also comes a lower administrative burden on the state to operate its tax revenue system. Perhaps most telling of all, the 9 states that do not have a state income tax are responsible for about 62 percent of all job growth over the last 10 years.
During our Senate hearings many people, and some on the committee, advocated for more aggressive tax reforms than those the committee recommended. After a thorough review of all the presentations and data, collectively the committee made four recommendations to begin to simplify and reform Georgia’s tax structure. First, Georgia should phase down the personal income tax rate from 6 percent to 5 percent with the goal to move to even lower levels while capping certain deductions and credits. Second, Georgia should maintain the current sales tax level of 4% and reduce or limit targeted exemptions. Third, the state should review existing credits, deductions and exemptions to consider their overall impact. This may provide revenues to enable the state to offer lower tax rates that apply to all Georgia residents. Lastly, the committee recommended that the state enact a supermajority requirement for the Georgia General Assembly to achieve before tax rates could be raised above current levels. The goal of these committee recommendations centered on simplifying Georgia’s tax system to provide more individual economic freedom, government transparency and competition for create new jobs and grow businesses.
The 2014 General Assembly took some action passing the proposed Constitutional Amendment known as Senate Resolution 415 which prohibits any increase in Georgia’s income tax above 6 percent. This measure will be considered by Georgia voters on the ballot this November.
To succeed and to remain a desirable place for businesses to operate, for families to live and for new ventures to flourish, Georgians must have the tools to compete. When the tax burden is heavy and our tax code is outdated, then our neighboring states benefit the most. Embracing the status quo or fighting for higher taxes does not serve the long-term interest of our citizens. Governor’s Deal and Perdue and a conservative legislature have made great strides the last few years — each one building off the one before. More work is needed; and I am committed to this cause on behalf of my district and for all of the people of Georgia. The Senate Finance Tax Reform subcommittee meeting schedule will be made available shortly as we continue our work to develop tax simplification measures.
As the Chairman of the Senate Finance Committee and a longtime supporter of comprehensive tax reform, I am fully committed to finding and supporting fiscally responsible measures and working to lower the overall tax burden on all Georgians. In the best interest of Georgians, I pledge to continue working together to make our state the best place to raise a family, to work and to expand a business to as we empowering people with greater economic freedoms and liberties.
Senator Judson Hill serves as Chairman of the Finance Committee. He represents the 32nd Senate District which includes portions of Cobb and Fulton counties. He may be reached by phone at 404.656.0150 or by email at email@example.com.