Tax cuts cause split at Capitol

ATLANTA - Karen Hallacy brought a prop with her earlier this month when she spoke during a news conference outside the Capitol against tax cuts being pushed by Georgia lawmakers.

Hallacy, legislative chairman for the Georgia Parent Teacher Association, raised aloft a science textbook being held together with duct tape.

"When the textbooks can't be replaced, our children suffer," she said. "We cannot implement piecemeal tax cuts without the quality of education being cut."

Hallacy and other advocates for Georgians who receive state services will have an important ally on their side as the tax reform debate of 2008 unfolds during the final stages of this year's legislative session.

Republican Gov. Sonny Perdue made it clear last week that he doesn't believe the state can afford to cut taxes as Georgia's economy turns sour.

"When you cut taxes long term, what are we going to do to pay for education, transportation and health care?" the governor asked last week. "What are we going to do to serve the growing needs of Georgia?

"It's time to stop playing politics with the financial health of Georgia's future."

The battle between Perdue and legislative leaders over whether to cut taxes is just one of two tax-policy struggles being waged under the Gold Dome.

The other is a dispute between House and Senate Republican leaders over which taxes to cut.

House plan

For almost a year, House Speaker Glenn Richardson, R-Hiram, campaigned across the state to abolish property taxes and replace the lost revenue with an expanded sales tax.

But widespread opposition to his plan, spearheaded by local governments and school districts, forced him into a series of compromises.

The final version of Richardson's legislation, which the House passed almost two weeks ago, would ask Georgia voters whether they want to eliminate the car tax and the state portion of the property tax.

A much more modest proposal than the speaker's original plan, it would provide an estimated $672 million a year in savings when the car-tax repeal is fully implemented. Dumping the state property tax would yield $94 million annually.

Senate Republican leaders anted up last week with legislation to cut state income taxes by 10 percent during the next five years. The proposal would save Georgia taxpayers $215 million during the fiscal year starting July 1, a savings that would increase to $1.2 billion in the fifth year, fiscal 2013.

Economic boost

Lawmakers in both chambers argued that the tax cuts would serve as an economic stimulus, comparing it to the federal tax rebate approved by Congress earlier this year.

But Senate leaders said their plan is better because it would kick in a year sooner than the car-tax repeal, which wouldn't take effect until July 2009.

"When people across Georgia are hurting, we need to make a statement that, 'We trust you. We want you to keep more of your money,'" said Sen. Chip Rogers, R-Woodstock, chairman of the Senate Finance Committee.

For their part, House Republicans touted their plan as better because it's simpler.

"Georgians want and need tax cuts they can understand," said Speaker Pro Tempore Mark Burkhalter, R-Alpharetta, who first introduced the car-tax repeal several years ago. "People don't trust that a tax cut is a tax cut unless you eliminate the tax."

Opponents say both House and Senate leaders are missing a key point.

Alan Essig, executive director of the Georgia Budget and Policy Institute, said cutting taxes at the federal level might help jump-start a flagging economy because Congress can go out and borrow money to plug the resulting hole in the budget. That's not an option for Georgia, he said.

"State governments cannot try to drive the economy during a recession because they have to balance the budget," he said. "You can't do economic stimulus on the state level through doing a tax cut."

Spending cuts

Essig said because of that constitutional requirement to balance the budget, a major tax cut would force the state to cut spending.

He said it would be next to impossible to do that without crippling critical services because the vast majority of what the state spends goes to education, health care and prisons.

Perdue has made the same calculations. He said he takes his responsibility to balance revenue with spending seriously, and that's why he's against either of the tax cuts being advocated by the House and Senate.

The governor accused legislative leaders of getting behind lower taxes to score political points in an election year.

"In Republican politics, tax cuts are a trump card," Perdue said. "The problem is, we're trying to trump one another in an intrasquad game. ... The fiscal health of Georgia going forward is what's being played with, and that's my concern."

But legislative leaders say they're convinced that the economic stimulus tax cuts would generate would be more then enough to offset the lost revenue. They say that's what happened when former Gov. Zell Miller took the sales tax off groceries during the 1990s.

"Whatever tax cut we put forward needs to be something that's going to put more money in the pockets of individuals," said Lt. Gov. Casey Cagle, the Senate's presiding officer. "Every dollar that government puts into an individual's pocket helps the economy."

Dave Williams can be reached at dave.williams@rockdalecitizen.com.