Saturday, April 9, 2011

Budget and Taxes

The legislature returns for the final three days Monday, Tuesday, and Thursday, April 11, 12, and 14 with significant issues before us.

Most important, House Bill 78, the Fiscal Year 2012 (FY 2012) state budget, directs state spending from July 1, 2011 through June 30, 2012 and totals $18.1 billion in state funds. While state funds have experienced a net increase of 2 percent as a result of improving economic conditions, total spending for FY 2012 has decreased by over 4 percent due to expiring federal stimulus funds. Not accounting for inflation, this puts us per capita below 2001 budget levels.

Finally, after thorough public input and numerous revisions, it appears the House will proceed with the first significant revision to the state's tax code in over 50 years. HB 388, based on recommendations made by The Special Council on Tax Reform, will begin, I repeat, begin, the process of moving Georgia's tax code away from taxing income and productivity and toward taxing consumption. It will NOT tax groceries, Girl Scout cookies, Boy Scout popcorn, veterinarian services, AAA memberships, haircuts, lawn care, or club memberships. [Thanks for your calls and emails about taxing services!]

HB 388 will reduce the state income tax rate from 6% to 4.6% - a 23% state income tax rate cut; increase the child dependent exemption from $3,000 to $5,300 per child for families with Georgia adjusted gross incomes (GAJI) up to $60,000; preserve itemized deductions of up to $30,000 for married filing joint households with GAJI up to $75,000 phasing out at GAJI over $177,000; and maintains the $35,000 per year retirement income exclusion. The overall income tax savings for Georgia's taxpayers will be $319 million in FY 2012.

To further improve Georgia's business competitiveness and encourage job creation, HB 388 eliminates, over a 3-year phase in beginning in 2013, the sales tax on energy used in manufacturing and consolidates all agricultural exemptions into a single exemption that will enhance fairness and equity. The value of these improvements is $110 million over three years.

To offset a portion of these tax cuts and exemptions, HB 388 streamlines a hodgepodge of state and local taxes and franchise fees on the retail sale of communications services with a single, flat 7% tax. Georgia will also join 44 other states that tax casual, person-to-person auto sales; however, sales among family members remain untaxed. HB 388 includes sales tax, as do at least 21 other states, on auto repair labor.

The net effect of HB 388 provides the citizens of Georgia with a $120 million tax cut in the first year of implementation.

I have listened to you carefully, the citizens of District 106, and I informed House leadership that I intended to vote NO on the previous versions of tax reform as the improvements did not result in significant, long-term savings for the average household in our area. I am so impressed with our Speaker and others in House leadership as they continued to work on the tax reform package to address your concerns and the concerns of other citizen's voiced through their Representatives.

After carefully reviewing the 71-page, HB 388 and running my own analysis, I believe this compromise tax reform package is a significant improvement over today's tax code and moves Georgia in a positive direction for both personal and business tax payers. Most importantly, I believe HB 388 is not simply "tax reform", but a "tax cut" and therefore, I intend to vote, as your Representative, in support of this thoroughly vetted legislation.

No comments: