A set of four bills before the Georgia General Assembly proposes to reform state tax code by lowering income tax, but tacking state sales tax onto many new types of purchases.
One part of the proposal would tax services, at a rate of 4 percent, for the first time. About 50 services are on the list, including haircuts, housekeeping, gym memberships, automotive repairs and veterinary care.
The legislation is promised to be revenue-neutral, according to the state's Special Council on Tax Reform and Fairness, which made the recommendations.
Opinions about it were anything but neutral.
"A haircut is something that's a repeat service. People come every four to six weeks, so it would add up," said Thelen, who owns Modish Salon & Spa on Broad Street. "I think it would hurt us in the long run."
David Crooke, who came to Modish for a trim, said he thought it was positive that lawmakers would try a new idea to eliminate a tax burden. Still, he said he wouldn't like it if his own business had to collect a sales tax.
"At first blush I think the cost would be more than 4 percent, because there would be an administrative burden to collecting the tax that would get passed on to the customer," Crooke said.
The purpose of the tax reform package is to shift the tax burden away from income and toward consumption, said Christine Ries, an economist at the Georgia Institute of Technology and a member of the council.
"Every expert in tax theory says a basic principle is to broaden the tax base and lower the rate," she said. "It distorts the economy much less.
"With an income tax you only tax income. A consumption tax has more types of categories. All kinds of things can be taxed."
The proposal reduces state personal and corporate income tax by a third -- from 6 to 4 percent -- over three years. It broadens the portion of income that is taxed, though.
Georgia personal income tax exemptions and deductions either disappear or are reduced in the proposal. Also, it reinstates tax on retirement income. Right now, up to $35,000 can be taken, tax free.
Thelen didn't put much faith in a lower income tax.
"They can promise it, but you can't trust that these taxes will stay lower," she said. "My client base is who I trust in the long run. If they get a new tax, they're going to feel it in their pocket."
Aaron Clements, owner of C&C Automotive in Augusta, was also doubtful the benefits of a lower income tax would offset the pain of a new sales tax. Under the proposal he isn't sure how much income tax he'd save. But he does know the additional sales tax his customers would pay.
That would be $2.12 for oil, lube and tire repair service, $28.04 for struts and alignment, and $18.70 for oil and new tires.
He said a sales tax would give South Carolina automotive centers a competitive advantage over Augusta businesses, especially for large repairs.
"I don't feel good about auto repair being taxed," Clements said. "People are already paying a huge amount of money for gas to drive their car ... it's almost like salt in the wound."
Dr. Thomas Walker of Augusta's Highland Animal Hospital also thought it was a bad time to tax pet owners.
"Already we're seeing an increased number of abandoned pets," he said. "With the economy the way it is, animal shelters are overloaded. People just can't afford it."
Ries said taxing services is not a new idea; already close to half of states do so. That has allowed states like Florida, Tennessee and Texas to bring personal income tax rates down to zero, giving businesses an advantage.
"If you want more of something, don't tax it. If you want more income and jobs, don't tax income," Ries said.
But Walker said only three other states impose sales tax on veterinary services, and it's the only professional service targeted in Georgia for taxation.
"I think the country's just becoming more of a service economy, so they're trying to figure out how to tax services," Walker said. "It would be fairer if they were going to tax all services. If it were chiropractors, dentists and doctors, I'd take less offense. Why single out vets?"