Speaker's scaled-down tax reform plan gets first airing

ATLANTA - Lawmakers got their first look Thursday at a scaled-down but still far-reaching tax reform plan sponsored by House Speaker Glenn Richardson.

The latest version of legislation that Richardson, R-Hiram, has been pushing for nearly a year would ask voters this November whether Georgia should eliminate school property taxes and replace some - but not all - of that revenue with an expanded sales tax.

"I intended and wanted to repeal all (property) taxes in Georgia," the speaker told members of a House subcommittee during the first hearing on his proposal since this year's legislative session began last month.

"That has proven to be more changes than most people could stand. ... (But) if nothing else comes out of this, we've proven it's OK to try to change."

While the new version of Richardson's plan reduces the scope of his original proposal, it also incorporates another tax reform that is being backed by Gov. Sonny Perdue.

His proposed constitutional amendment and a companion enabling bill would eliminate school property taxes, which typically account for at least half of annual property tax bills.

In the handful of Georgia counties where senior citizens already pay little or no school taxes, including Gwinnett and Cobb, homeowners could qualify for a homestead exemption of up to $30,000.

Under a recent change in the plan, school districts would still be allowed to levy property taxes. However, the state would write a check to each system covering the tab.

School officials concerned about the hit on their budgets have been among the plan's most ardent opponents.

"It is not going to cost a school district one penny," Richardson said.

The proposal also would get rid of Georgia's car tax, with the state again picking up the cost so local governments wouldn't lose the tax revenue.

Vehicle owners would pay only a $20 registration fee, with half of the revenue dedicated to trauma care.

In exchange for all of that property tax relief, Georgians would pay sales taxes on groceries, lottery tickets and most consumer services.

Medical, child care and education expenses would be exempt from the sales tax.

Individuals and families with incomes at or below the poverty level would receive a tax credit to help defray their grocery bills, but only if they file a state income-tax return.

Richardson said that requirement would help ensure that illegal immigrants pay at least some taxes.

"There are too many people who are illegally or improperly in this country who aren't paying taxes," he said. "This will have those people paying taxes on groceries."

Tax reform advocates, including Perdue, criticized earlier versions of Richardson's plan as a tax shift - from property taxes to sales taxes - rather than a tax cut.

But the new version of the legislation would cut more in property taxes than it would put back in sales taxes. As a result, it would reduce the tax burden on Georgians by an estimated $826.9 million during fiscal 2011, its first full year of implementation.

However, viewed through another prism, that also would mean a huge hole in the state budget, said Alan Essig, executive director of the Georgia Budget and Policy Institute.

"That's about one-seventh or one-eighth of the education budget, one-third of the Medicaid budget and one-third of what we spend on the Department of Corrections," he said.

Richardson said the General Assembly would get a chance to re-evaluate the plan's impact early in its implementation. The legislation includes a sunset provision that would allow lawmakers to repeal it at the end of 2012 if it's not bringing in enough revenue.

While Essig said he supports the tax credit on groceries, he said the plan's increased emphasis on sales taxes would disproportionately affect lower- and middle-income Georgians, who spend a larger percentage of their incomes on basic necessities than the more well to do.

The new version of Richardson's proposal also calls for eliminating the one-quarter mill state portion of the property tax. That relatively small measure would net the average homeowner a savings of about $30 a year.

Perdue introduced the proposal into the Senate as a stand-alone constitutional amendment. Senators passed it overwhelmingly on Thursday, 49-4, and sent it on to the House.

The subcommittee is expected to vote on Richardson's plan next week.