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Transcript of 1 Tax Shift Plans Threaten Georgia Moderated by Wesley Tharpe, GBPI Join the Twitter conversation:...
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1
Tax Shift Plans Threaten GeorgiaModerated by Wesley Tharpe, GBPI
Join the Twitter conversation: @gabudget | #gbpi2014
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MEG WIEHE
STATE TAX POLICY D IRECTORINSTI TUTE ON TAXATION AND ECONOMIC POLICY ( I TEP)
[email protected] – WWW.ITEP.ORG
J O I N T H E T W I T T E R C O N V E R S AT I O N : @ G A B U D G E T
The Tax Shift Threat
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Poor Rich
Sales Taxes
Income
Poor Rich
Income Taxes
Income
Income vs. Sales Taxes
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Georgia’s Income Taxes Fall More on Well-off, Sales Taxes Take More from Typical Families
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Tax Shift Examples
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• Eliminate personal and corporate income tax
• Keep current sales tax exemptions
• Raise state sales tax rate to 11.5% meaning a combined state and local sales tax rate of 14.5%
Shifting from Income Taxes to Sales Taxes in Georgia
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+11.3% +10.8%
+9.9% +9.8% +9.0%
+8.4%
+7.0%
+16.2%
+14.1%
+11.6%
+10.2%
+8.0%
+6.0%
+3.5%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Lowest 20%Second 20% Middle 20% Fourth 20% Next 15% Next 4% Top 1%
Current Georgia Tax SystemPost Tax-Swap
A Georgia Tax Shift Would Further Push Tax Responsibility onto Middle- and Low-Income
Taxpayers
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9
Tax Shift Plans Threaten Georgia
Michael Leachman, Director of State Fiscal ResearchCenter on Budget & Policy Priorities
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Kansas Job Growth Has Stalled Behind States Like Georgia
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The Five States that Cut Taxes the Most Had Slower Economic Growth
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Tax Cuts and Tax Shifts Don’t Create Shared
Prosperity:
Lessons from North Carolina
Alexandra Sirota
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Economic Context
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0.7
0.8
0.9
1.0
1.1
1.2
1.3Job Loss
1981 Recession
1990 Recession
2001 Recession
2007 Recession
Months from start of recession
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Fiscal Context: The State Budget
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
0%
1%
2%
3%
4%
5%
6%
7%
8%
Final Budget = 5.36%
40-year average = 6.16%
Total General Fund appropriations as a share of state personal income
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Fiscal Context: The State Tax System
South
Dak
ota
Alabam
a
New H
amps
hire
Idah
o
South
Car
olina
Georg
ia
Florida
Mon
tana
Orego
n
New M
exico
Kentu
cky
North
Car
olina
Mar
yland
Arkan
sas
Nebra
ska
Iowa
Ohio
Mich
igan
Minn
esot
a
Rhode
Islan
d
Califo
rnia
New Je
rsey
Hawaii
Main
e
Wyo
ming
Alaska
0%
5%
10%
15%
20%
25%
To
tal T
ax
es
as
% o
f S
tate
Pe
rso
na
l In
co
me
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Personal Income Tax
Graduated rate flattened to single rate
Numerous deductions and credits eliminated• Personal exemption• Medical expense deduction• Child and dependent care tax credit• College savings deduction
7.75%7%6%
5.8%5.75%
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State Earned Income Tax Credit
Failed to extend the sunset
More than 900,000 North Carolina families received the state EITC last year
The state EITC helps working families
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Corporate Income Tax
6.9% to 5% to 3%
Of the $325 million corporate tax loopholes and breaks, the plan closes only $29 million.
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Sales Tax
Rate stays the same
Base expands to include:• Amusement and entertainment• University dining• Mobile homes• Maintenance and installation of real
property
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Final tax plan fails to meet the core principles of tax reform
• A tax system needs to pay for services needed to promote economic growth, public safety and many other important functions.
• Equity needs to be built in. That means, for example, that lower income households don’t pay a higher share of their income in taxes than do high income households; and that people in similar economic situations pay roughly similar taxes.
• A tax system needs to be constructed in ways that avoid, to the extent possible, unpredictable, large fluctuations in the amount of revenue collected in a given year.
• The amount of revenue collected should increase as the economy expands, reflecting the increased needs for education, transportation and many other services.
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A tax shift.
Average total tax change as a share of income
Lowest 20%
Second 20%
Middle 20%
Fourth 20%
Next 15%
Next 4%
Top 1%
–1.4%
–1.2%
–1.0%
–0.8%
–0.6%
–0.4%
–0.2%
—
+0.2%
+0.4%
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A tax cut.
FY 13-14 FY 14-15 FY 15-16 FY 16-17 FY 17-18($700,000,000)
($600,000,000)
($500,000,000)
($400,000,000)
($300,000,000)
($200,000,000)
($100,000,000)
$0
($86,600,000)
($437,800,000)
($644,600,000)($623,500,000)
($649,900,000)
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In the next two years, the tax plan passed this session will reduce available revenues by $525 million.These dollars could have been used to get North Carolina back to pre-recession funding levels.
• Keep 1 in 5 teacher assistant jobs in FY 2014 and FY 2015
• Provide a 1% salary increase for teachers • Funded textbooks and instructional supplies at the
required amount to meet the needs of a growing student body
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Every major media outlet editorialized against the tax plan
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Public support for tax cuts lowand falling.
68% oppose tax cuts that result in public education cuts
62% think that an educated, trained workforce is more important to a business location decision than tax rates
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Implementation has proven more complex than anticipated.
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What we learned in North Carolina
• Tax shifts push the tax load to middle and low-income taxpayers and give the greatest benefit to wealthy taxpayers.
• The public does not like a tax cut that benefits the wealthy and profitable corporations and puts at risk public education.
• The state’s reputation and long-term competitiveness are at risk.
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