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Let the buyer beware GREAT plan?

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POSTED: October 31, 2007 5:00 a.m.

" Let the buyer beware" may be appropriate when considering House Speaker Glenn Richardson’s GREAT Plan to eliminate Georgia’s property taxes, replacing them with additional sales taxes. An independent study by Georgia State University’s Fiscal Research Center suggests another adage, "if it looks to good to be true, it probably is." The study suggests that it is unlikely that Richardson’s proposal would raise the revenue needed to cover the loss of property taxes, leaving Georgia with a state budget awash in red ink.

Many may be disappointed to hear this. What Richardson, a Republican from Hiram proposes, is music to the ears of business and private property owners who have experienced consistent increases in property tax bills.

His proposal, if approved as a constitutional amendment next fall, would replace property taxes with additional sales taxes on a wide range of goods and services. However, as the Atlanta Journal-Constitution noted, more than 100 items have been exempted by the Legislature, including many grocery items. Most of these exemptions would have to go, and the state would have to tax essentially every service offered and goods sold to keep revenue at acceptable levels.

Richardson has questioned whether the study - which was not directed specifically at his proposal - is accurate.

Critics note that while under the House speakers’ proposal, most goods and services would face sales taxes, a significant amount of health care and business transactions would either be exempt or taxed at a lower rate.

The GSU report says Georgia probably would end up some $2 billion short, or about 10 percent of the state’s $20 billion budget, the AJC said.

This is not the first suggestion the GREAT Plan has serious flaws. Richardson’s proposal doesn’t have the support of Gov. Sonny Perdue, and its validity has been questioned by Lt. Gov. Casey Cagle.

Both have wondered whether or not the plan would consistently provide revenues the state must have to do business, the bulk of which goes to education, public safety and health care. An economic downturn could spark a drastic drop in consumer buying, causing a dip in cash flow that wouldn’t happen under the current tax system.

Additionally, virtually every local governmental agency in the state - city, county and school boards - oppose Richardson’s proposal. They uniformly cite a shift of power away from local government to the state. This does not bode well with agencies that currently have the authority to establish the funding level they need.

The GSU study spotlights potential pitfalls the Legislature must not skim over in a headlong rush to do something that sounds good to property owners but could spell disaster for the state.

 

Macon Telegraph

Oct. 15, 2007

 

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