What if I could show you that Georgia taxpayers could cut our income tax rate, cut our cost of living overall, raise our quality of life and bring more jobs and prosperity to Georgia simply by making a few bold moves to simplify our taxes?
On Tax Day, individuals and families are familiar with the strained tap dance that we engage every year on a complex labyrinth of write-offs and exemptions, in the hope that we can choreograph our performance to avoid too big a tax hit by the time we file on April fifteenth. For Georgia small business owners who predominantly file their business taxes on their individual returns, the dance is even more arduous; it stifles growth and innovation by committing more of a small business owner’s resources to a burdensome tax obligation. And the health of our overall Georgia economy? Well, it’s driven by small business pass through operations whose net income, in 2010, comprised 54 percent of all net business income in Georgia.
While Georgia has many things going for it, keeping us competitive and raising our quality of life means enacting state tax simplification. According to The Tax Foundation, our individual income tax ranks among the 10 worst in the country. And in this regional race with our neighboring states, the other runners are not simply doing their stretches at the starting line – they’re running! North Carolina, currently ranked 44th, is projected to move to as high as 17th as their recent tax reforms take effect. Florida is ranked 5th, South Carolina 37th, Alabama 21st and Tennessee 15th. This is based on an annual competitiveness index that gives higher marks for low rates, less complexity, and fewer politically – motivated tax preferences.
The good news is, we can achieve a tax trifecta – lower our income taxes and provide a cut to every taxpayer regardless of income level while reducing our cost of living and maintaining our AAA credit rating as one of the few states that have received it. And long-standing dynamic tax models suggest that this type of tax simplification will create better than revenue neutrality for Georgia through the built in incentives of new economic activity generated by the cuts. Bottom line: more economic activity means more gross receipts and more gross receipts means greater state revenue. North Carolina’s state legislature enacted a stair step tax reduction plan in 2013 with this very model in mind by tying a series of additional reductions to increased state revenues.
Recent 2012 data from Georgia State University’s Fiscal Research Center shows that by taking a broad base alternative tax base of $282 billion, we can cut our income tax rate in half or better, reducing the burden of our individual income tax rate from 6 percent to 3 percent (or lower) with a sales tax rate of 6.2 percent. This means small business owners can reinvest in innovation and create more jobs in Georgia while individuals in every tax bracket get to keep more of their hard earned money on Tax Day. A monthly tax prebate will essentially offset the sales tax on services by providing the average Georgia household a monthly payment equal to or greater than the cost. Imagine paying less in Georgia income tax on April 15th and receiving a monthly check from you State government!
As Art Laffer, famed author of The Laffer Curve, assessed, “If you want more of something, tax it less. If you want less of something, tax it more.” It is time Georgia taxpayers and small business owners keep more of our hard earned money, have a lower cost of living and a higher quality of life. These tax simplifications mean jobs and greater prosperity for our Peach State and all of her citizens.
Joel Aaron Foster is State Communications and Grassroots Coordinator for Americans For Prosperity Georgia.