by Dave Williams | Capitol Beat News Service
ATLANTA – Georgia could eliminate its income tax without raising sales taxes to make up the lost revenue, one of the nation’s leading tax reform advocates said Tuesday.
The nine states that have done away with their income taxes are experiencing enough population growth to offset that loss of tax revenue, Grover Norquist, president of Washington, D-C.-based Americans for Tax Reform, told members of an ad hoc state Senate committee formed to consider getting rid of Georgia’s income tax.
“When you attract more people and add more businesses and investment, you end up with more tax revenue at lower rates,” he said.
While Georgia has been honored for more than a decade as the best state in the nation to do business, the Peach State has the second-highest income tax rate in the Southeast, added Lt. Gov. Burt Jones, the Senate’s presiding officer. That puts Georgia at a disadvantage in the competition for jobs with surrounding states with lower tax rates or no income tax at all, he said.
“If we want to continue to stay competitive … we’ve got to be looking for ways to give Georgia a competitive advantage,” Jones told members of the committee at Tuesday’s kickoff session.
Norquist said states that are reducing or eliminating their income taxes are doing so by limiting spending rather than raising their sales taxes. They target bringing in a certain amount of revenue, and any taxes they take in above that amount are dedicated to tax relief, he said.
“As a percentage of GDP (Gross Domestic Product), government should be smaller,” said Norquist, famously quoted back in 2001 as saying government should be small enough that he could drag it into a bathtub and drown it.
But Sen. Nan Orrock, D-Atlanta, a member of the committee, said abolishing the state income tax would make it harder to meet the demands of a growing population, particularly in a climate of uncertainty prompted by the Trump administration’s slashing of federal spending on programs including food stamps and disaster relief.
“We have massive needs in this state,” she said. “That would argue for having robust revenue.”
Norquist recommended that states looking to abolish their income taxes do so gradually. Georgia already has adopted that approach, with the General Assembly voting to reduce the income tax rate from 6% to 5.75% in 2022, then lowering it further to 5.49%, 5.39% and – this year – to 5.19%.
Norquist said reducing the income tax rate encourages business investment even before the tax rate actually gets to zero.
“It sends a signal to the investment world,” he said. “Being in route to zero is almost as good as being at zero.”
Norquist told senators reducing taxes also is smart politically.
“It’s been a popular position,” he said. “Nobody’s lost an election for (lowering) the income tax to zero.”
Sen. Blake Tillery, R-Vidalia, the committee’s chairman, said one way to offset the revenue that would be lost by abolishing Georgia’s income tax would be to crack down on the generous tax incentives the state offers to attract business investment.
“If you don’t owe income taxes, you don’t need a tax credit,” he said.
The committee has until Dec. 15 to make recommendations to the full Senate.
