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1
Tax Shift Plans Threaten GeorgiaModerated by Wesley Tharpe, GBPI
Join the Twitter conversation: @gabudget | #gbpi2014
MEG WIEHE
STATE TAX POLICY D IRECTORINSTI TUTE ON TAXATION AND ECONOMIC POLICY ( I TEP)
[email protected] – WWW.ITEP.ORG
J O I N T H E T W I T T E R C O N V E R S AT I O N : @ G A B U D G E T
The Tax Shift Threat
Poor Rich
Sales Taxes
Income
Poor Rich
Income Taxes
Income
Income vs. Sales Taxes
Georgia’s Income Taxes Fall More on Well-off, Sales Taxes Take More from Typical Families
Tax Shift Examples
• Eliminate personal and corporate income tax
• Keep current sales tax exemptions
• Raise state sales tax rate to 11.5% meaning a combined state and local sales tax rate of 14.5%
Shifting from Income Taxes to Sales Taxes in Georgia
+11.3% +10.8%
+9.9% +9.8% +9.0%
+8.4%
+7.0%
+16.2%
+14.1%
+11.6%
+10.2%
+8.0%
+6.0%
+3.5%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Lowest 20%Second 20% Middle 20% Fourth 20% Next 15% Next 4% Top 1%
Current Georgia Tax SystemPost Tax-Swap
A Georgia Tax Shift Would Further Push Tax Responsibility onto Middle- and Low-Income
Taxpayers
9
Tax Shift Plans Threaten Georgia
Michael Leachman, Director of State Fiscal ResearchCenter on Budget & Policy Priorities
Join the Twitter conversation: @gabudget | #gbpi2014
Kansas Job Growth Has Stalled Behind States Like Georgia
The Five States that Cut Taxes the Most Had Slower Economic Growth
Tax Cuts and Tax Shifts Don’t Create Shared
Prosperity:
Lessons from North Carolina
Alexandra Sirota
Join the Twitter conversation: @gabudget
Economic Context
-3
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0.7
0.8
0.9
1.0
1.1
1.2
1.3Job Loss
1981 Recession
1990 Recession
2001 Recession
2007 Recession
Months from start of recession
Fiscal Context: The State Budget
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
0%
1%
2%
3%
4%
5%
6%
7%
8%
Final Budget = 5.36%
40-year average = 6.16%
Total General Fund appropriations as a share of state personal income
Fiscal Context: The State Tax System
South
Dak
ota
Alabam
a
New H
amps
hire
Idah
o
South
Car
olina
Georg
ia
Florida
Mon
tana
Orego
n
New M
exico
Kentu
cky
North
Car
olina
Mar
yland
Arkan
sas
Nebra
ska
Iowa
Ohio
Mich
igan
Minn
esot
a
Rhode
Islan
d
Califo
rnia
New Je
rsey
Hawaii
Main
e
Wyo
ming
Alaska
0%
5%
10%
15%
20%
25%
To
tal T
ax
es
as
% o
f S
tate
Pe
rso
na
l In
co
me
Personal Income Tax
Graduated rate flattened to single rate
Numerous deductions and credits eliminated• Personal exemption• Medical expense deduction• Child and dependent care tax credit• College savings deduction
7.75%7%6%
5.8%5.75%
State Earned Income Tax Credit
Failed to extend the sunset
More than 900,000 North Carolina families received the state EITC last year
The state EITC helps working families
Corporate Income Tax
6.9% to 5% to 3%
Of the $325 million corporate tax loopholes and breaks, the plan closes only $29 million.
Sales Tax
Rate stays the same
Base expands to include:• Amusement and entertainment• University dining• Mobile homes• Maintenance and installation of real
property
Final tax plan fails to meet the core principles of tax reform
• A tax system needs to pay for services needed to promote economic growth, public safety and many other important functions.
• Equity needs to be built in. That means, for example, that lower income households don’t pay a higher share of their income in taxes than do high income households; and that people in similar economic situations pay roughly similar taxes.
• A tax system needs to be constructed in ways that avoid, to the extent possible, unpredictable, large fluctuations in the amount of revenue collected in a given year.
• The amount of revenue collected should increase as the economy expands, reflecting the increased needs for education, transportation and many other services.
A tax shift.
Average total tax change as a share of income
Lowest 20%
Second 20%
Middle 20%
Fourth 20%
Next 15%
Next 4%
Top 1%
–1.4%
–1.2%
–1.0%
–0.8%
–0.6%
–0.4%
–0.2%
—
+0.2%
+0.4%
A tax cut.
FY 13-14 FY 14-15 FY 15-16 FY 16-17 FY 17-18($700,000,000)
($600,000,000)
($500,000,000)
($400,000,000)
($300,000,000)
($200,000,000)
($100,000,000)
$0
($86,600,000)
($437,800,000)
($644,600,000)($623,500,000)
($649,900,000)
In the next two years, the tax plan passed this session will reduce available revenues by $525 million.These dollars could have been used to get North Carolina back to pre-recession funding levels.
• Keep 1 in 5 teacher assistant jobs in FY 2014 and FY 2015
• Provide a 1% salary increase for teachers • Funded textbooks and instructional supplies at the
required amount to meet the needs of a growing student body
Every major media outlet editorialized against the tax plan
Public support for tax cuts lowand falling.
68% oppose tax cuts that result in public education cuts
62% think that an educated, trained workforce is more important to a business location decision than tax rates
Implementation has proven more complex than anticipated.
What we learned in North Carolina
• Tax shifts push the tax load to middle and low-income taxpayers and give the greatest benefit to wealthy taxpayers.
• The public does not like a tax cut that benefits the wealthy and profitable corporations and puts at risk public education.
• The state’s reputation and long-term competitiveness are at risk.
www.ncjustice.org
Email me at: [email protected] Follow us on Twitter at: @ncbudgetandtax
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