A new state tax code that its authors say is business friendly is set to be published by Monday. The rewrite will be the first step in a plan to build Georgia’s finances from sales taxes rather than income taxes.
However, one of Macon’s largest employers might be able to keep a multimillion-dollar sales tax exemption.
“There’s no tax we didn’t look at,” says David L. Sjoquist, an economist at Georgia State University and a member of the so-called Tax Council, which has spent the past seven months on a mission to look for ways to rewrite the code.
And the council has decided that economic growth is its No. 1 priority, declaring in a report to legislators that “we currently tax the wrong things (income) versus taxing consumption and personal choices in discretionary spending.”
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The report was written by an 11-person council dominated by business interests, plus four economists. The question is where and how exactly it would shift taxes onto consumers.
“I know they have been considering broadening the tax base to include services and groceries,” state Sen. Cecil Staton, R-Macon, said.
“I think that sales taxes or consumption taxes are a much better way to move forward,” he continued, “but I would only consider that if there was a corresponding reduction, say in income taxes.”
Some industries have lobbied the council to guard their existing exceptions, such as the sales tax waiver on prescription medicines or sod bought directly from farmers.
But The Medical Center of Central Georgia should keep its exemption from paying sales tax, predicted Monty Veazey, president and CEO of the Georgia Alliance of Community Hospitals, a Tifton-based lobby representing more than 50 not-for-profit hospitals and medical centers statewide.
“We earn our tax exemption,” he said. Somebody has to treat the uninsured and the indigent, Veazey argues, and that’s community hospitals.
For west and Middle Georgia, the unrealized state revenue amounts to about $29 million, according to the group’s calculations, which were worked up and submitted to the council in November.
Since then, Veazey said he’s had no follow-up questions from the council, a silence he sees as a good sign.
“I don’t think anything will come of it” for rural hospitals, he said. “I think they recognize the benefit we provide.”
But Roy Fickling, a major midstate property developer and Tax Council member, said he won’t comment on any particular item, joking that the members had made a “blood oath” to keep quiet until the report is released publicly.
However, he said the point of the tax code rewrite is not to raise more or less money, just to change where the money comes from.
“We did not have any particular mandate whether it should be revenue neutral,” Fickling said. “It was believed by most of the council that whatever we came up with shouldn’t be punitive to the operations of state government.”
Georgia should collect about $15.1 billion in taxes next year, according to the council. About half of that will be income tax. Another third is sales tax. However, for the fiscal year ending in June 2012, the state will need to cut about $2 billion from its budget, based on projections. Estimates of the shortfall vary by hundreds of millions of dollars, in part because it’s hard to estimate the sales tax take for the next year. That depends on how much people are spending.
The council’s last public meeting is Wednesday, and it has yet to set an agenda. Neither the report nor a draft is expected, though the council may release a short summary of the recommendations. The report is due Monday, the same day the Georgia General Assembly begins its 2011 session. Then a bill will be written from the report and will be fast-forwarded through much of the ratification process.
Only a Republican-dominated House and Senate joint committee will eyeball the bill, and they’re not allowed to make major changes. Then they’ll send the bill, or portions of it, straight to the House floor for a vote, then to the Senate. Neither chamber can make floor revisions.