ATLANTA -- A nationwide group funded by the biggest companies in the United States is telling Georgia leaders that the state will become more competitive if it cuts income taxes and shifts toward sales taxes instead.
But there are unknowns in that argument that face the lawmakers who must make the decision, a Bonaire tax attorney said.
His opinion matters. As state House majority leader, Larry O’Neal is a top GOP boss on his side of the Capitol.
“There are issues that need to be dealt with to understand the predictability of any change we may make,” he said after a Thursday briefing when the influential American Legislative Exchange Council urged a shift.
For example, “People can electronically avoid consumption tax” by shopping online, he pointed out.
Sites such Amazon.com that don’t have any physical presence in Georgia don’t have to collect sales tax for the state.
Besides that, the Georgia Department of Revenue has a better record of collecting everything due than the bricks-and-mortar shopkeepers who are supposed to collect sales taxes on the state’s behalf. It’s easy for small stores especially to dodge taxes by ringing up purchases on a separate register that does not leave a paper trail for the tax man.
Several states already tax Internet sales, and a similar effort may yet appear in Georgia’s Legislature this year. But Congress is considering legislation as well that might end in federal regulation.
So there may be some risk in making major changes before the e-commerce tax dust settles in D.C.
Jonathan Williams, the director of tax and fiscal policy for the exchange council, told the joint meeting of the state House Ways and Means and Senate Finance committees that “people do change their behavior based on incentives, and taxes are an incentive.” Put another way, higher state personal income taxes will drive people to other states.
Take California, he suggested, with its beautiful beaches, weather and relatively high tax rates. Its population grew more slowly than Georgia’s between 2000 and 2010.
It’s not clear if or when Georgia would cut income taxes and raise sales taxes. A blue-ribbon panel of business and academic leaders recommended just such a change in early 2011.
There’s been no major movement yet.
Senate Majority Leader Chip Rogers, R-Woodstock, told the meeting he’d like to see a model of how to make any such transition: “We can’t just wipe out 60 percent of our state’s revenue at one time.”
But he said he’s convinced that though it is counterintuitve, “lower tax rates equal more growth.”
Williams said his data show that growing a tax base -- more companies, more people -- results in more government revenue than raising rates.
The exchange council, headquartered in Washington, D.C., is a nonprofit organization, which some of the country’s biggest companies spend tens of thousands of dollars a year to support. It draws up model state legislation and pushes it in all 50 states. Rogers and legislators from other states are board members.
The council says nearly 1,000 pieces of legislation based on their models appear in statehouses across the U.S. every year. They say one of five becomes law.