Metropolis: Taxing our patience

Georgia House Speaker Glenn Richardson, R-DistantGalaxy, has more knives stuck in him than Julius Caesar after a bad day at the Forum. Et tu, Sonny? Et tu, Casey?

The magnet attracting all the sharpened blades is Richardson’s incendiary proposal to ditch all property taxes. This brainstorm materialized after an effort to solve school-funding issues. “If the problems caused by property taxes were so bad, I thought, ‘Why not repeal it?’” he recalled in an interview last week. “I looked at the income tax, as well, but the property tax was the big bucket of water.”

Richardson has his eye on the state’s top job. His strategy is that while his likely opponents posture and snipe at each other, he’ll stand alone with, as he calls it, his GREAT plan. That’s an acronym for “Georgia’s Repeal of Every Ad Valorem Tax,” and, no, I don’t know what happened to the “V.”

It’s a clever ploy. Richardson’s competitors – Senate President Pro Tempore Eric Johnson and Lt. Gov. Casey Cagle – will be bogged down dealing with real issues such as water and transportation while Richardson grandstands with a faux populist tax plan.

Even if he doesn’t win the governor’s seat, Richardson would still have unparalleled power as the House speaker if his plan succeeds. The state would have the power of determining how much money is doled out to cities and counties and schools, and the House controls the budget.

Whatever else you can say about Richardson, he exudes chutzpah: Think big, break the status quo. “Why not be the first state to eliminate property taxes?” Richardson excitedly muses.

As he correctly points out, “small, incremental” thinking solves nothing. It’s why we have congested roads and no real vision for regional mass transit. It’s why we must now seriously contemplate the possibility of water rationing.

And it’s why the state’s taxation system – just like the IRS – is a Frankenstein monster of mismatched parts, special-interest exemptions and anachronistic formulas. “Everyone has talked about tax reform for years,” Richardson says. “No one ever did anything.”

Richardson’s House Resolution 900 seeks to have the Legislature place a constitutional amendment on the November 2008 ballot that would eliminate about 80 percent of property taxes. Counties, cities and schools would still collect property taxes to pay off bonds that, when approved, were backed by the levies.

Replacing the property tax would be a vastly expanded sales-tax base, although the rate would stay the same. Georgians now pay about 7 percent – it varies a little with some counties. The GREAT plan would eliminate most exemptions and expand the sales tax to include almost all services, from haircuts to lawyers. According to Richardson, that could triple the amount the state collects in sales tax.

The problem is, the speaker is playing a game of Three-Card Monte with taxpayers. The details keep shifting as fast as a card shark’s fingers. First, he wasn’t going to tax medical care and business-to-business transactions, and then he was. First, there would be no caps on business-to-business purchases, then as a gift to corporations he limited the amount taxed to $100,000. Then, let’s see, groceries would be taxed but poor folks would get rebates when they filed their state income tax – but, Richardson says with a sly “heh, heh,” not if they’re here illegally or as tourists. The plan has quickly become a maze of arcane calculations even worse than the current tax code.

“All of those changes mean hundreds of millions of dollars,” says Alan Essig, who runs the Georgia Budget and Policy Institute. “No one can tell what the bottom line is.”

Just about everyone chides Richardson’s arithmetic. Gov. Sonny Perdue last week sniped at Richardson’s core contention: “I don’t necessarily think Georgia’s tax system is broken, in a crisis.”

Who would win? Businesses would escape all real-estate taxes and their sales-tax liability would be limited. Who would lose? Seniors, who would lose property-tax exemptions they now enjoy without getting any break from the sales tax. And the middle class and poor, for whom sales taxes always mean an unfair burden because most of their income must be spent, and therefore taxed.

And while Richardson castigates local governments for bloated spending, Amy Henderson, spokeswoman for the Georgia Municipal Association, observes that state expenditures have soared at a rate three times that of cities.

Richardson knows the power of his pitch, however. The speaker cites polls showing 58 percent of Georgians want to scrap property taxes. If the measure is on next year’s ballot, I’m betting it will pass.

Exactly what will pass – if Richardson’s constant twiddling and tweaking continue – will be another mishmash. Gift-laden lobbyists pushing exemptions will decide the details. This is Georgia, after all. Already we see that at work. The powerful development/sprawl lobby has already ensured home purchases won’t be taxed under Richardson’s plan – using the deceitful claim that that would resemble an ad valorem tax. But if you tax the sale of a car or a sewing machine, why not a house?

Debating Richardson’s plan will bog down the Legislature at a time of multiple crises. Tax overhaul needs patient study and consensus building – we can’t fix water and transportation, as well as revolutionize taxation, in one short General Assembly session.

Also, Georgians, especially Republicans, should raise hell over Richardson’s betrayal of a paramount principle, local control of government. “A major concern is the loss of local funding decisions by local citizens and locally elected officials,” says Megan Middleton, the intergovernmental affairs manager for the city of Atlanta. She notes that due to the inherent volatility of sales taxes, this plan would make it extremely difficult to come up with a realistic annual budget.

Richardson’s rejoinder: In an economic downturn, “Why should government spend more when the people have less? We need to limit the expansion of government.”

That sounds good, but it would mean chaos for local government. Even worse, at the whim of the Legislature – not at the will of local voters – school, city and county budgets could be slashed. That would turn Georgia into a banana republic ruled by a junta of all-powerful state officials.

The official website for the GREAT plan can be found at http://www.thegreatplanforgeorgia.com/.

Here’s one good commentary: http://onlineathens.com/stories/110707/opinion_20071107023.shtml

And another: http://www.onlineathens.com/stories/080107/opinion_20070801034.shtml