Once that report is issued, I will post a summary of the council’s findings and recommendations. At this time, I will summarize a recent presentation by the Chairman of the Special Council, A.D. Frazier, in which he discussed the work of the council and previewed some of the council’s conclusions and recommendations.
First, the Chairman explained the work of the council, noting that it held 5 formal meetings—which included presentations from tax and policy experts—as well as 11 “fact-finding” sessions around the state, at which citizens had an opportunity to ask questions and offer opinions regarding the state’s tax system.
Next, the Chairman outlined the council’s “guiding principles,” noting that the council seeks to create a system that is growth-enhancing, stable and clear, fair and equitable, and which provides proper avenues for resolution of tax disputes. He noted that Georgia is currently considered a “business-friendly” state by COST and other publications, but that Georgia’s tax system relies too heavily on individual and corporate income taxes. According to the council, Georgia needs to “start on a path” to reduce its reliance on income-based taxes and replace them with consumption taxes.
Thus, the council’s final report will likely recommend a simplification of Georgia’s individual and corporate income taxes, reducing the current complexity of the code that is created by a number of different tax brackets, deductions, exemptions, and credits, with an eye toward eventually reducing the income tax rates and replacing that revenue with increased revenue from consumption-based taxes.
The council appears to be particularly skeptical of Georgia’s array of corporate income tax credits, and will likely recommend that those credits be replaced with two broad credits (for “job creation” and “capital investment”), with an emphasis on attracting small businesses. Furthermore, in lieu of credits with requirements specified by the legislature, the council instead will likely recommend that the state grant the Commissioner of Economic Development the power and latitude to customize incentive packages to attract new businesses and expand existing businesses in the state. Finally, the Chairman stated that any credit programs should be tracked and measured to insure that Georgia is generating positive net revenues by granting the credits.
With respect to the sales and use tax, the council’s final report is likely to include a number of recommendations for expanding the sales and use tax base by (1) increasing the number of transactions subject to tax and by (2) reducing the number of entities and transactions exempt from tax. However, the Chairman noted that existing exemptions for business and agriculture inputs should be made permanent. The Chairman’s presentation did not include much discussion of real and personal property taxation, but the Chairman noted specifically that Georgia’s inventory tax is particularly burdensome and harms the state’s competitiveness with its neighbors.
Finally, the council will likely advocate that the Georgia legislature create a special tax court, giving Georgia a specialized forum to hear state and local tax appeals. Such a forum would give Georgia a fair, equitable, and transparent forum for handling tax disputes, as having a specialized forum would allow a Georgia tax expert to create a more consistent, predictable body of tax law in Georgia.