Including The Fact That It's Not Finished Yet

By Dick Pettys
InsiderAdvantage Georgia

(11/8/07) Hang onto your hat. The GREAT plan isn’t finished yet.

House Speaker Glenn Richardson held a news conference Wednesday to go over some of the latest details of his proposal to replace all but a handful of property taxes in Georgia with an enhanced sales tax, and one of the new details was that the distribution formula by which the broadened sales tax would be returned to local governments is not yet a done deal.

The formulas he posted to the GREAT text website earlier this week may not, in fact, be the ones that end up being used.

“The way we’ve got it now - you get what you’ve got now, plus your population ... plus the greater of the increase in the consumer price index or how much your digest grew. That would necessitate continuing to keep values; now the digest is actual sales. Members of my staff have been working and they presented me an alternate approach that, instead of using digest values, would use economic indicators for each community - about 20 economic indicators that would give communities an incentive to be wise with how they spend money and yet would reward them for everything from population growth, inflation, new building, capital stock and a list of 20 economic indicators,” he said.

Richardson said it’s more complicated than what he initially proposed and he’s trying to decide if it might be a better system “than simply measuring the increase in the consumer price index or the digest. So it could change, but it’ll still be the same base.”

Here are some other key details he outlined Wednesday:

* The tax on groceries, removed by former Gov. Zell Miller, will be re-imposed, but Georgia residents who earn up to twice the federal poverty level will get a refundable credit when they file their state income tax returns. The key to that provision is the term “Georgia residents.” Richardson commented: “That will mean if you are not a Georgia resident, especially if you’re not a U.S. citizen, you will pay taxes on groceries.”

* Prescription drugs will be taxed, but Georgia residents will get a dollar-for-dollar credit for what they’ve spent on prescription drugs on their state income taxes.

* All personal and professional services would be subject to the sales tax, but there would be a cap on things like doctor and medical visits and business-to-business transactions.

* The sales tax on medical charges would apply to the first $500 spent by an individual per doctor. In a county with the statewide 4 percent tax plus 3 percent local option add-ons, that would mean a sales tax of $35 per doctor per year. In the case of individuals with health insurance, the tax would be applied to what the insurance company paid - not what the doctor billed.

* Business transactions would also have caps. Individuals would pay sales tax only on the first $10,000 of business they did with a business or a professional. In a 7 percent county, that would be a tax of $700 per year per vendor. For instance, if an individual hired a lawyer for $10,000, he would pay sales tax of $700. It would still be $700 if the lawyer’s fee was $20,000.

* The sales tax for transactions by business with other businesses would be capped either at $100,000 or $500,000, depending on what number is needed to achieve the revenue needed to replace property taxes. Richardson said the limit is designed to allay fears that the tax would put Georgia businesses at a disadvantage with businesses in neighboring states.

* As for property taxes, homeowners still would have to pay things like their local governments’ bonded indebtedness and the levy for special tax districts. But he has said before that such payments account for only about 20 percent of the present property tax bill.

* Homeowners who are Georgia citizens would be exempt from all other property taxes on up to two homes - their principal residence and a secondary or vacation residence.

* Out-of-state residents who own homes in Georgia would pay a fee of 50 cents per square foot, up to $2,000. He distinguished between a fee and a property tax by saying that a fee is fixed and predictable, while the property tax can fluctuate with property values and tax rates from year to year.

* Finally, he said apartment renters won’t pay a sales tax on their monthly checks to the landlord. But those who aren’t Georgia residents will pay that same square-footage fee of up to $2,000 that will be charged to out-of-state homeowners. “I’m sure you can imagine that gets people that are sojourning in this state that might not be U.S. citizens, and such as that,” he said.

To critics who have suggested the plan needs more study, he said:

“I think that we have been taxing property owners for 157 years, and here’s the only number I think that we ought to put out there - $1.5 billion. That’s how much property tax revenue rose from 2005 to 2006. And if we don’t stop it now, the rising rate of property tax is going to be something that our citizens cannot afford to pay. We cannot wait until we get into a financial crisis to fix the problem. We have to look and forecast that a financial crisis is coming. When taxes are rising at the rate they’re rising, I think now is the time to do this. I think it’s time to change from property taxes to consumption taxes, and I’m prepared to bring this to a vote in the Georgia House of Representatives. But more importantly, I’m prepared to let the people of Georgia vote.”

He called his plan a way to “limit the expansion of government based upon the economic viability of our state and the community and the ability of people to pay. Because people then would determine if the government grew at the rate the people expended money ... I don’t think government should be growing when people don’t have the ability to pay, and that’s the fundamental disconnect I think in the conversation between me and local government. Local government says, ‘Well, we ought to grow anyway in spite of the ability of people to pay.” And I say that’s wrong and that thought has got to be changed.”