Alan Essig of the Georgia Budget and Policy Institute is my go to guy when I want to try to get to the bottom of something that involves taxes or budgets. In this interveiw Alan comments on Speaker Glenn Richardson’s proposal to eliminate the property tax.
The curious thing is that there is no substance to the proposal, it’s just all talk–at least right now–and that is what bothers me. You would think that when it came to something this important, there would be an effort to give everyone enough time and information to make a reasonable decision. Alan said he would like no less than 3 to 6 months to study any proposal and run the numbers. My bet: he won’t get that much time and neither will anyone else, including those guys we elected to represent us.
Alan says that every state in the union has a property tax. For Georgia to think it can become the first to eliminate it in one fell swoop, seems irresponsible to me. Alan mentions the fact that a few years ago one of those northern states, Michigan, I think, enacted sweeping rollbacks in property taxation and almost went bankrupt when there was a blimp in the economy.
Also, the State levies only a small property tax, like .5 mil. The majority of the property tax is levied and controlled by local cities, counties and school boards. It is where they get their operating budgets, their power. Eliminating property taxes is going to eliminate a lot of local power. Now why would a state legislator, even one serving as Speaker, be in such a hurry to eliminate the foundations of local power and transfer that power to the State, particularly the leaders thereof? I understand all the local governments and their organizations, like GMA, oppose the Speaker’s plan.
The real question is where is the additional money going to come from? Property taxes account for about 8 to 10 billion in tax collections. So where are you going to get that kind of money? As I understand it, the Speaker initially proposed to just eliminate all (or most) exemptions to the sales tax. According to Alan, two of those exemptions need to be kept: (1) governmental purchases, and (2) business to business purchases. And these two exemptions account for $5 billion in exemptions. The point: if you keep just these two exemptions in place, there is no way the sales tax can make up the tax revenue lost by the elimination of the property tax.
Now if I were planning a budget, I would conclude game over, you can’t eliminate property taxes and make up the difference in sales taxes. But there he is, Speaker Richardson, going around the state pumping up the landed gentry and making this sound like it is a walk in the park–a tax exempt park, no doubt.
There is only one thing to be accomplished by the elimination of property taxes. Rich folk that own a lot (and I mean a lot) of property will get a tax break. The rest of us that don’t own tons of rental property or commercial property or anything much more than our homes, that just work at a job everyday for a living, that have kids and buy everything on the shelves, will pay more in taxes–sales taxes.
Let me predict the future. The Speaker (more likely, someone else at his direction) will drop the bill to eliminate the property tax a week or so before the 2008 legislature begins. The Speaker will flex his muscles, threaten a few recalcitrants, and ultimately his power will make sure the proposal (whatever it is) sails thru the House with little or no hearings and none worth a damn. Then, it’s over to the Senate where the question will be whether or not Lt. Governor Casey Cagle (or some other Republican leader with the guts to “just say no”) is man enough to tell the Speaker to go back to the country club and kill this kind of cram it down your throat leglislative initiative. You have my vote Casey!
Think I am nuts! Look down the road to the 2010 gubernatorial elections. Will it be the Speaker who single handledly eliminated the property tax and saved 500 Georgians a ton of money versus the Lt. Gov. who protected Georgians from the selfish impulses of power and kept the property tax in place?
Alan Essig, Georgia Budget and Policy Institute [29:45m]:
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