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Georgia House speaker's reforms to cap taxes on services

ATLANTA - Georgians would pay a sales tax on prescription drugs under House Speaker Glenn Richardson's tax reform plan, but they could get their money back through a tax credit.

They'd pay sales taxes to visit a doctor or consult with a lawyer, but the tax bill for those services would be capped.

Those were some of the limits on taxes Georgia individuals and businesses would pay under Richardson's proposal revealed by the speaker on Wednesday, as he continued putting flesh and bones on what critics have contended is a sketchy plan.

For months, Richardson, R-Hiram, has been touting his plan to eliminate property taxes in Georgia and replace the lost revenue with an expanded sales tax.

Opponents have countered there's no way sales taxes could generate enough money to make up for the $9.6 billion the state and local governments receive in property taxes.

But earlier this week, Richardson, produced numbers saying that the state would have to generate only about $4.6 billion for his plan to work.

The $5 billion difference between those two numbers, he said, would come from an infusion of local-option sales tax money that would be generated by the plan's expanded sales tax and from limited property taxes that would remain on the books.

On Wednesday, Richardson said his plan's bottom line would also be bolstered by applying the sales tax to a broad array of services. Currently, Georgia collects sales taxes only on goods.

"We're going to tax all personal and professional services for all people," he said.

However, Richardson said taxes on health care services would be capped at $500 per physician per year.

In addition, he said people who spend a large amount of money on a single service, such as a lawyer, wouldn't be taxed beyond the first $10,000 spent during a single year.

For businesses, the services cap would be set at $100,000 to $500,000 a year, he said.

Richardson said the cap would allow the state to collect a sales tax on "routine services" without gouging people or businesses facing serious difficulties.

"If you have a legal bill of more than $10,000, you probably have a pretty big problem," he said.

But all of those caps would blow a big hole in Richardson's plan, said Alan Essig, executive director of the Georgia Budget and Policy Institute, a critic of the proposal.

"As he cuts different deals to help different folks, it takes that much more out of the system," Essig said. "This plan will be billions of dollars short."

Richardson's plan would also expand the sales tax to groceries and prescriptions, which aren't taxed under current law.

Low-income Georgians would receive tax credits for what they spend on groceries, while taxpayers of all income levels could get credits for their prescription purchases.

But Essig questioned whether the tax credits would work. He said people who buy prescription drugs would have to keep up with every receipt, while many low-income residents don't earn enough to file a state tax return.

"What about those folks?" he said. "Are we going to do an education campaign to make sure people are aware of it?"

Richardson said parts of his proposal are still being finalized.