"The consequence of that is we took out of our tax base one of the most stable components of our sales-tax collections," said Roger Tutterow, an economics professor at Mercer University in Atlanta.
The General Assembly just passed next year's budget Wednesday which included cuts and increases in fees and a new tax on hospitals.
When policymakers meet again in January, slow economic growth will likely lead them to consider more tax increases, Tutterow told a luncheon meeting of the Mercer Executive Forum. If they do, he recommended the tax be spread broadly so the burden will be evenly distributed and people will be less prone to change their behavior to avoid the new tax.
Tutterow is one of the economists specifically named by legislation passed Tuesday that creates the Special Council on Tax Reform and Fairness for Georgians. The commission, led by Gov. Sonny Perdue, is tasked with looking at ways to overhaul the tax code to reduce the up-and-down swings in revenue while also searching for ways to stimulate job creation.
Saying he wants to keep an open mind before the commission begins its work, Tutterow declined to tell if he would recommend repealing the grocery tax exemption.
"I know there's going to be pressure to raise taxes, and an ideal way to do it would be part of a broader tax reform," he said. "If we have to do it, it is better to look at widening the base than it is to look at raising the rates."
Forecasting modest growth in the coming two years, Tutterow predicted that weak tax collections will continue to pressure the budget.
"If we get sluggish economic growth, this time next year it's going to be hard to make cuts, the cuts are already so deep. Then the political will may be there to change the tax code," he said.
Any tax increase in that case, he said, should be temporary.
One way the commission can broaden the tax base on a permanent basis would be to consider repealing the 200-plus other sales-tax exemptions besides food, which range from services to airliner fuel. Most were granted in the last two decades to various political interests in the name of economic development, but the result of each was the whittling away of the tax base, Tutterow said.
Perdue hasn't signed into law the legislation creating the commission, but he has agreed to serve on it and has said it is a good idea. The governor had talked about launching his own tax-reform task force before the recession, but then-Speaker of the House Glenn Richardson pre-empted him with a plan to eliminate property taxes, which ultimately failed in the legislature.
The reform commission Tutterow and Perdue will serve on will report to a special legislative panel that will translate the recommendations into a bill or constitutional amendment that lawmakers won't be able to change before they vote on it.