Is state tax cut a ‘greater good’ bill?

The Georgia Senate on Tuesday approved a state income tax cut as the 2017 regular session of the General Assembly headed into its final hours. Whether you would be among its beneficiaries or one of those who ends up subsidizing it is not clear.

The bill, which would reduce the top state income tax rate from 6 to 5.65 percent, passed the Senate 38-16 on a mostly party-line vote.

It’s certainly a fairer formula than the original House version, which would have set a flat rate of 5.4 percent. As reported in the Atlanta Business Chronicle, Senate Finance Committee Chairman Chuck Hufstetler, R-Rome, cited a Georgia State University analysis showing the flat rate would actually increase taxes on lower- and middle-income working Georgians.

The Senate bill keeps the progressive formula of 1 percent for low-income earners, graduated by income up to what would now be the 5.65 percent maximum. It also eliminates the write-off of state income taxes for those who itemize deductions.

But, as with all tax “reform” measures, the question that hangs in the air is always the same: How will it be paid for? More to the point — by whom?

The Atlanta Journal-Constitution cites a state analysis of the plan that says the benefit of this cut would go “almost entirely to upper-middle and particularly upper-income” Georgians. The cost, in this analysis, would be $292 million in 2019, and up to $526 million over the next five years.

One revenue-producing clause involves the long-discussed sales tax on out-of-state Internet vendors. Online retailers outside of Georgia that in a year generate at least $250,000 in sales to Georgia, or make at least 200 sales to Georgia customers, would have to either collect sales tax or send “tax due” notices to Georgia customers spending more than $500 in a year on their products.

That’s a fairer (on many levels) and less regressive option than some; the poorest working Georgians do not make a major customer base for e-sales, and such a tax would help level the field for traditional on-site retailers.

But an Internet sales tax probably wouldn’t generate enough bucks to make up the difference. And there is more than ample precedent in Georgia for the suspicion that this could be one of those tax “cuts” that really amounts to upward redistribution of wealth — a shifting of the tax burden down the economic food chain from those with political and economic clout to those with little or none.

The eleventh-hour timing of this should also set off some warning bells. The movement to reinstitute, after more than two decades, a sales tax on food — the very essence of regressive taxation — has never really been put to rest in Georgia. Taxing the poorest working Georgians on the fundamental necessities of life to pay for top-bracket tax breaks shouldn’t be anywhere within planetary orbit range of this proposal. We would urge lawmakers to confirm that it is not.

This story was originally published March 29, 2017 at 4:56 PM with the headline "Is state tax cut a ‘greater good’ bill?."