ATLANTA — Senate leaders say they have the mechanics for reducing the state income tax and possibly eliminate it completely.
Senate President Pro Tempore David Shafer, R-Duluth, is sponsoring two constitutional amendments for changing the state’s basic tax policy.
“This is to start the shift from an income tax to a consumption tax,” he said.
If voters approve, Senate Resolution 415 would prevent the Legislature from raising the state income tax, and SR 412 would require that any increase in the sales tax go toward lowering the income tax.
Because the measures can’t go on the general election ballot until next year anyway, Shafer figures there’s no rush to pass them in the nine days remaining in this year’s session.
Though his proposals won’t automatically cut the income tax rates, he feels they’re a start.
“They are the framework,” he said.
Critics argue that raising the sales tax hurts the poor because a greater share of their income goes to necessities that can’t be put off, while the rich can skip discretionary purchases if they want to avoid the sales tax.
Unlike the FAIR Tax plan championed by some conservatives as a way to end the national income tax, Shafer’s concept doesn’t include special tax breaks for low-income people.
“That’s open to discussion as we go along,” he said. “This is just the starting point.”
All of the Republicans in the Senate are co-sponsoring the amendments and they make up the two-thirds vote needed for passage there, so the measures are certain to clear that hurdle. How they would fair in the House is harder to gauge.
House Ways & Means Chairman Mickey Channell wasn’t familiar with Shafer’s amendments when asked about them Monday so he couldn’t offer an assessment of how his panel would view them. Republicans are one vote shy of having two-thirds of the House, requiring at least a Democrat or the lone independent to go along.
Nine governors are calling for the elimination of income taxes in their states. Georgia leaders have wanted to do it since Republicans took control of the state 10 years ago.
The reasons are that high-tech entrepreneurs say it’s easier to hire highly paid workers in states without income taxes and that selling out to a larger company is a tax-free event.
“The real issue is economics; you shouldn’t tax things you want more of,” said Kelly McCutchen, the president of the market-oriented think tank Georgia Public Policy Foundation.
Cutting or eliminating the income tax is tricky because it brings in half of what the state uses for operations. McCutchen said raising the sales tax from 4 percent to 6 percent, eliminating some deductions and raising the personal exemption to benefit the poor would allow for cutting the income tax by half.