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Tax system overhaul emerges at state Capitol

ATLANTA — With the budget crisis continuing to squeeze state government, the effort to overhaul Georgia’s tax system is on again.

This time, a committee of economists, business leaders and politicians would gather to review the state’s entire tax system and suggest changes. They’d look at sales taxes and the 100-plus sales tax exemptions — some of which benefit only specific businesses and groups — in state code. They’d look at reducing income and corporate taxes, as well as the state’s capital gains tax.

They’d also look at taxing services instead of just products, an idea that has come up before in Georgia.

“Potentially a total overhaul,” said state Rep. Larry O’Neal, the measure’s sponsor and chairman of the House Ways and Means Committee, which normally oversees tax-code re-writes.

“The concept is that our revenue system has not kept up with our growth,” O’Neal said.

By next January, the group would put together a series of suggested tax reforms. Those reforms would bypass the normal tax-code writing process and go to a special committee of House and Senate leaders.

If that group approves of the changes, they would head straight to the floor of the House of Representatives for a vote. Amendments would not be allowed, according to the House Bill 1405, which would set all of this into motion.

That’s unusual, but “it’s important to keep the politics out of it and analyze it from the policy standpoint,” O’Neal said Wednesday.

O’Neal, R-Warner Robins, is not the only high-profile sponsor behind the bill. Speaker of the House David Ralston, House Majority Leader Jerry Keen and House Speaker Pro Tem Jan Jones have all signed on, making its passage all but certain in the House.

This review wouldn’t seek to do away with property taxes or “impact local taxes at all,” O’Neal said.

That means it’s not a return of former Speaker of the House Glenn Richardson’s GREAT plan. That measure, which failed during the 2008 legislative session, also would have overhauled the state’s tax system. But it would have done away with property taxes altogether, replacing that revenue with new sales taxes on services. Meanwhile, a separate committee put together by Lt. Gov. Casey Cagle has been looking at the other side of the ledger: state spending. His appointed Budget Task Force of state business leaders released a report this week that points out nearly $3.2 billion in savings the state could realize during the next five years.

About half of those savings would come from cutting health-care costs, partly by encouraging state employees to live healthier and getting them into plans that cost the state less money. There’s also a call for small Medicaid co-pays when uninsured people visit the emergency room but it’s not an emergency.

That would encourage them to visit clinics and doctors offices instead of the more expensive emergency room, the task force concluded.

Other savings would come by restructuring the way teachers are paid and implementing Gov. Sonny Perdue’s plan to base teacher pay, at least in part, on student achievement.

But the task force also calls for doing away with the annual step increases teachers expect in salary and change the way their retirement plans are funded. Both of those will be difficult politically to put into place.

Cagle was clear this week that he’s not endorsing any part of the plan — at least not yet. There are 50 recommendations in the plan, and they’ll be studied further, he said.

To contact writer Travis Fain, call 361-2702.

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