THE WRONG TAX AT THE WRONG TIME CHASING THE WRONG SOLUTION
STATE T-SPLOST
IT’S THE WRONG TAX AT THE WRONG TIME CHASING THE WRONG SOLUTION
THE WRONG TAX
It is the wrong tax for several reasons. It is increasing most communities’ sales tax from 7% to 8%. Atlanta could go to 9%. When you couple this with a state income tax of 6% the income weighted tax burden in Georgia is one of the highest in the nation.
It also is the wrong tax because the tax should be paid primarily by the ones using the roads or rapid transit. A tax should not only raise revenue but also incent a behavior which benefits society. By using sales tax to fund this while exempting the tax on gasoline you are rewarding the heavy users while penalizing people who do not drive as much. An example are senior citizens who pay this tax on their utility bills and grocery purchases, but drive very little. The problem with increasing the excise tax on gasoline is it makes us more uncompetitive with other states. While our gasoline tax is one of the lowest in the country, we are one of the few states who add our sales tax to our gasoline tax. This makes our total gasoline tax the 3rd highest in the southeast.
It is obvious that this regional solution is primarily for metro Atlanta. By forcing it on the rest of the state, it will cause billions of dollars in wasteful spending at a time our state economy cannot afford it. In this regional solution they have linked counties that have very little in common. My region is a perfect example. Whitfield County is a Tennessee/Georgia border county. We are grouped with Paulding County, a metro Atlanta County. Whitfield County has to compete with a state which has no state income tax. By increasing our sales tax, which narrows our gap between Tennessee’s higher sales tax, it make us less competitive since they have no state income tax. Also by attempting to pass the tax regionally they have formulated a project list based on the politics of getting the tax passed, not on efficient spending on the most needed transportation projects. Once again, Whitfield County is a excellent example. The first project list was less than $50 million dollars. This first list had some wasteful projects in it. Once people realized that our county could produce upwards of $150 million dollars in this tax they increased our project list to over a $140 million dollars. This regional concept will cause billions of dollars of wasteful spending over the next 10 years if passed.
It is also the wrong tax when you will be increasing the portion of the DOT budget funded by state taxes from around $400 million dollars to possibly between $1.6 billion to $1.8 billion dollars per year. This is an entity that is already struggling with their financial controls. It would be irresponsible to increase any state agencies budget by this much at one time.
THE WRONG TIME
This tax is at the wrong time because of the general economic condition of our state. The state’s unemployment rate has greatly exceeded the national average for a number of years. Our state’s per capita income over the last decade has fallen from 21st in per capita income to 40th relative to the rest of the state’s. We are now poorer on a per capita basis relative to the rest of the state’s than we were in 1979 when we were 34th. The only way we could afford to increase our sales tax is if we use the proceeds to reduce our state income tax. Every state who has no income tax or has reduced their income tax has outperformed the other states. You will not improve Georgia’s relative economic performance by passing possibly the largest tax increase in Georgia history. It also is the wrong time because we cannot afford to take a possible $1.2 to $1.4 billion dollars out of a Georgia economy that is still struggling. This is not just a penny. It is on every grocery and utility bill. This adds up to hundreds of dollars a year to the average Georgian.
CHASING THE WRONG SOLUTION
Those of us outside the metro Atlanta region know how important this region is to the state. It is the main driver of our state’s economy. We also know that this poorly conceived tax is driven by the traffic congestion into the metro Atlanta region. We also understand that it is not just the core of Atlanta that is important, but it is the entire metro region. Their project list is overweight rapid transit. This is yesterday’s solution. We have spent upwards of $750 billion dollars in this country on mass transit in the last few decades while ridership has declined by 30%. More people walk to work than ride mass transit. We need a solution that encourages people to work closer to where they live. While the overall population in the metro counties grew in the last decade the percentage of population working in these counties declined. Cobb County went from an employment to population ration of 48% in 2001 to 41% in 2011. Gwinnett from 47% to 36% and Rockdale went from 47% to 34%. We cannot get the metro regions economy going again with nothing but bedroom counties. This not only overloads the arteries into Atlanta proper, but also causes budget crises in these counties. Without enough industries and business paying taxes, these counties cannot afford to pay for services for their increased populations. This is why we continue to see these counties struggling with large budget deficits in their school budgets and county government budgets. We need a solution that rebuilds the economic infrastructure in their counties. This is true tax reform that includes a plan to reduce the state income tax. Included in this is a plan to have people working in Atlanta proper living closer to their workplace. Since the last census, Atlanta proper grew at a much slower rate than the rest of the state. Atlanta needs to become a city where more people not only choose to work, but also choose to live there.
The right solution is a plan that promotes balanced economic growth in the surrounding counties through true tax reform led by a reduction in our state income tax. A dynamic small business environment will help us accomplish this. Since most small businesses are flow through entities when it comes to their business taxes, a state income tax impedes the growth of this most important growth engine. An individual small business owner must pay their corporate taxes at the personal income rate. In order for local governments to have a healthy, growing tax base to provide the services their citizens demand they have to rebalance their tax digest with more industrial/commercial businesses.
CONCLUSION
I will close with two additional thoughts. If this tax plan is as big as a mistake as I think it is, it will not be one we can correct next year or the year after. It is a ten year mistake! We will greatly hinder our state’s economic future for a generation. The leadership that formulated this plan had to know the weaknesses in it. Why else would they ask for a referendum from the voters with a gun pointed at their heads? When they placed two penalty clauses in the legislation it proved their lack of faith in their own plan. One is that if the local officials do not place it on the ballot, the community is penalized in their DOT funding that they have already paid taxes for. The second is if the voters decide this is not a tax that they can support and they vote it down, they are also penalized with their DOT funding that they have already paid taxes for. This is certainly not any democratic principle that I believe in.
Let’s get Georgia moving again with comprehensive tax reform. That is Plan B.
Sincerely,
David E. Pennington
Mayor
City of Dalton
