Speaker's tax reforms sail through committee

ATLANTA - House Speaker Glenn Richardson's tax reform plan easily cleared a legislative committee Thursday, putting it on track to hit the House floor next week.

What began as a bold proposal to abolish property taxes in Georgia now incorporates elements not only of the speaker's legislation but other reform measures being pushed by Gov. Sonny Perdue and Senate Republican leaders.

The property-tax portion of the plan has been scaled down from its original version to get rid of only the school portion of homeowners' tax bills.

Still, that's a lot of tax relief, Richardson, R-Hiram, told members of the House Ways and Means Committee.

"Nearly 2 million Georgians will see their tax bills either cut in half or more," he said.

Richardson's plan also calls for eliminating the state's car tax, which comes due each year on vehicle owners' birthdays.

The proposal also would eliminate the state portion of the property tax, an idea being championed by Perdue. And it would limit how much local governments could raise property taxes without voter approval by capping property assessments and millage rates.

The Senate passed similar legislation earlier this month.

To help make up the revenue that would be lost by the various tax cuts, the plan calls for expanding the 4 percent state sales tax to include groceries, lottery tickets and most consumer services. Medical care, education and child care costs would not be taxed.

Also, it would impose a $20 car registration fee. Half of the revenue raised by the fee would be used for trauma care.

For months, Richardson touted his plan as revenue neutral, a spreading of the tax burden from 2 million property owners to all 9.5 million Georgians.

But due to recent changes, the proposal now calls for reducing taxes. Richardson said Thursday that it represents a net tax cut of $422 million during the next three years, as its provisions are phased in.

During its first full year of implementation, fiscal 2011, it would reduce taxes by $827 million.

Critics say that would blow a huge hole in a state budget made up mostly of spending on such vital basic needs as health care, education and public safety.

"What services or budgetary cuts would have to be made?" Rep. Virgil Fludd, D-Fayetteville, a member of the committee, asked Richardson.

But the speaker said the state is growing so rapidly that the tax cuts likely would be more than offset by the additional Georgians contributing to the economy. As an example, he cited the repeal of the sales tax on groceries during the 1990s, which did not result in a loss of revenue.

"I don't believe there will have to be a reduction in services," Richardson said.

Much of the opposition to the speaker's plan comes from education groups.

Herb Garrett, executive director of the Georgia School Superintendents Association, said school district officials are worried, even though the legislation requires the state to pick up the costs to local systems of eliminating school property taxes.

"It doesn't guarantee the portion of school funding that comes from the state," Garrett said.

After Richardson's presentation, the committee overwhelmingly approved a constitutional amendment that is at the core of the plan, accompanying legislation spelling out details of the proposal and the Senate resolution capping property assessments.

To gain passage, the constitutional amendment must be approved by two-thirds of the House and Senate. If it survives that uphill climb, it would go before Georgia voters in November.

"The people will ultimately be the ones to decide," Richardson said.