Guest Column: Sen. Eric Johnson

The Fundamentals of Tax Reform

By Sen. Eric Johnson

(12/18/07) Former U.S. Senator Huey Long once said that preferred tax policy was, “Don’t tax me. Don’t tax thee. Tax the man behind the tree.” We would love for the services we require from police to schools to be paid for by somebody else. But they aren’t. We pay for them.

It is clear that tax reform will be a key issue in the upcoming 2008 session of the Georgia General Assembly. I hope we will keep our eye on the following goals as we debate tax policy. We should move forward with tax reform if it simplifies our tax code, encourages the creation of wealth, and recognizes the competitive world economy of the 21st Century. We should reduce the income tax that discourages productivity and encourages the exportation of jobs. We should control runaway spending by government which results in the demand for higher taxes. We should protect homeowners from backdoor tax increases. We must ensure a broad tax base with low tax rates. And, as conservatives, we should let local governments set policies and establish programs at the community level where they are the closest to the taxed.

Governor Perdue has proposed that we eliminate the unearned income tax on Georgians over 65 as a means of attracting wealth to our state. We have taken the first step by exempting $35,000 per senior. We should finish the job.

Government needs taxes to survive like vampires need blood. It is too easy to justify more spending, especially when the economy is good and taxes are rolling in. Any effort to reduce or control taxes will fail unless we reduce or control spending. The Senate has long focused on controlling runaway state spending and reducing the special projects and programs in the budget. Last year, we passed a proposed constitutional amendment that would require that state revenue (tax) increases that exceed inflation and population growth must be used for tax cuts, debt reduction, or increasing the reserves. A supermajority could elect to spend extra revenue on critical needs or emergencies. SR 20 passed the Senate and rests in the House of Representatives.

Last week, I pre-filed a proposed constitutional amendment in the Senate. SR 686 would freeze residential property taxes at the time of purchase and not allow them to increase above the inflation rate until the property is sold. A homeowner’s sliding homestead exemption would automatically increase each time the property’s value increases, thereby freezing property taxes and forcing local governments to raise their hands to vote to increase their millage rates. This is another way to control the flow of tax revenue into government. 32 communities have adopted a local version and it is time to give every homeowner this protection. Businesses should not be affected by this residential limitation as long as local governments receive the inflationary increase proposed.

Speaker Richardson and the House are proposing that we reduce the reliance of local governments on property taxes as the primary source of revenue and shift the burden to consumers by increasing the sales tax on groceries and some services that are not presently taxed. This would broaden the tax base and help protect private property rights.

We seem to have the framework in place for historic tax reform. Since most of these initiatives will require a constitutional amendment and a two-thirds majority of the legislature, any significant reform will need bi-partisan support. And anything that receives a supermajority and makes it to the ballot next November will require the approval of Georgia’s voters. Please watch the process closely and stay in touch with your Representative and Senator. Success depends on whether the taxpayer and their elected representatives can defeat the status quo to create a fairer system for taxing our citizens.