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Tax Shift Plans Threaten GeorgiaModerated by Wesley Tharpe, GBPI

Join the Twitter conversation: @gabudget | #gbpi2014

MEG WIEHESTATE TAX POLIC Y DI RECTOR

INSTI TUTE ON TAXATI ON AND EC ONOMI C POLIC Y ( I TEP)

MEG@ITEP.ORG – 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

Poor Rich

Sales Taxes

Income

Poor Rich

Income Taxes

Income

Income vs. Sales Taxes

Georgia’s Income Taxes Fall More on Well-off, Sales Taxes Take More from Typical Families

Tax Shift Examples

• 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

+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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Tax Shift Plans Threaten Georgia

Michael Leachman, Director of State Fiscal ResearchCenter on Budget & Policy Priorities Join the Twitter conversation: @gabudget | #gbpi2014

Kansas Job Growth Has Stalled Behind States Like Georgia

The Five States that Cut Taxes the Most Had Slower Economic Growth

Tax Cuts and Tax Shifts Don’t Create Shared Prosperity:

Lessons from North Carolina

Alexandra Sirota  Join the Twitter conversation: @gabudget

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

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

Fiscal Context: The State Tax System

South

Dakota

Alabam

a

New H

amps

hire

Idaho

South

Caroli

na

Georg

ia

Florida

Montan

a

Orego

n

New M

exico

Kentuc

ky

North

Caroli

na

Maryla

nd

Arkans

as

Nebra

ska

Iowa

Ohio

Michiga

n

Minnes

ota

Rhode

Islan

d

Califor

nia

New Je

rsey

Hawaii

Maine

Wyo

ming

Alaska

0%

5%

10%

15%

20%

25%

Tota

l Tax

es a

s %

of S

tate

Per

sona

l Inc

ome

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%

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

Corporate Income Tax

6.9% to 5% to 3%

Of the $325 million corporate tax loopholes and breaks, the plan closes only $29 million.

Sales Tax

Rate stays the same

Base expands to include:• Amusement and entertainment• University dining• Mobile homes• Maintenance and installation of real

property

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.

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%

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)

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

Every major media outlet editorialized against the tax plan

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

Implementation has proven more complex than anticipated.

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.

www.ncjustice.org

Email me at: alexandra@ncjustice.org Follow us on Twitter at: @ncbudgetandtax

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