Tax Shift Legislation Threatens Georgia's Future

ATLANTA, Aug. 7, 2013 /PRNewswire-USNewswire/ -- Plans to drastically cut or abolish state income taxes and replace them with higher sales taxes would raise taxes on up to 80 percent of Georgia taxpayers and spike Georgia's average state and local sales tax to as high as 14.5 percent.

A seismic shift to a sales tax-dependent system will destabilize the state's finances, harm businesses and communities and critically undermine Georgia's economy.

Those are the conclusions of a report published today by the nonpartisan, nonprofit Georgia Budget and Policy Institute (GBPI). The detailed study analyzes outcomes for other states that cut income taxes and estimates the potential impact of legislation filed this year to cut or eliminate the source of half of Georgia's revenue, the income tax.

"The surprise here is how extreme the tax shift is from Georgia's wealthiest taxpayers to its low- and middle-income families," said Wesley Tharpe, GBPI's tax policy analyst and author of the study.

Key findings of the study include:

• Swapping the income tax for higher sales taxes will require a combined state and local sales tax rate as high as 14.5 percent to recover the lost revenue.
• Slashing income taxes will likely lead to spending cuts for the ingredients of economic growth, including transportation, education and public safety.
• Shifting to a sales tax will hurt many Georgia businesses, especially small ones, since drastically higher sales taxes will increase their costs and shrink their customers' pocketbooks.

A state legislative committee held the first in a series of planned hearings in July to study the effects of shifting from Georgia's balanced tax system to one based almost entirely on the sales tax. Two bills are set to be considered by the Georgia General Assembly when it convenes next January, although the proposals to date lack key details.

"As these plans add specifics we'll continue to update our estimates," Tharpe said. "But this impractical idea isn't new, so chances that we'll see some wrinkle that mitigates the problems identified in the study are slim to none."

To download the study, go to: www.gbpi.org

About Georgia Budget and Policy Institute:

Founded in 2004, the Georgia Budget and Policy Institute (GBPI) is a nonpartisan, nonprofit center of research and analysis focused on the state of Georgia. Visit www.gbpi.org for more information

SOURCE Georgia Budget and Policy Institute