ATLANTA - A legislative committee Wednesday approved a bill slashing state income taxes, hours after Gov. Sonny Perdue accused House and Senate leaders of playing a political game of one-upsmanship with tax policy.
The Senate Finance Committee voted unanimously to cut income taxes by 10 percent during the next five years, giving Senate Republicans an alternative to a plan to abolish Georgia's car tax passed by the House last week.
Senate GOP leaders say reducing income taxes would do more to stimulate the state's sagging economy than getting rid of the car tax because lower taxes on wages would encourage people to work longer, leading to larger paychecks.
"By lowering tax rates, you encourage more of what you want to encourage, which is creating wealth," said Sen. Chip Rogers, R-Woodstock, chairman of the Finance Committee.
But earlier Wednesday, Perdue lashed out at his fellow Republicans in the General Assembly for pushing tax cuts the state can't afford to appeal to voters in an election year.
"All these tax plans are more about politics than policy," the governor said. "They're trying to figure out how to get elected. I'm sitting here trying to figure out how to balance this budget."
Alan Essig, executive director of the Georgia Budget and Policy Institute, also questioned the effectiveness of legislative Republicans' strategy of using tax cuts as an economic stimulus.
Essig told Rogers' committee that the state is legally obligated to operate under a balanced budget. Unlike the federal government, he said, the state can't borrow money to make up for the revenue it loses to tax cuts.
"A dollar we're not spending on health care and education doesn't go through the economy," he said. "Economically, it's a wash."
But Rogers said Georgians can spend their money more efficiently for what they and their families need than the government.
"If a dollar is going to be spent on needs, aren't those needs better met by the person earning that dollar?" he said.
The committee also approved the other components of a Senate tax reform plan unveiled on Tuesday.
The proposal also calls for freezing the assessed values of all properties at current levels and limiting future assessment growth to the rate of inflation, based on the Government Price Index.
And it would limit the annual growth in state spending to a formula based on inflation plus population growth.
Earlier in this year's legislative session, the Senate passed a proposal by Perdue to eliminate the state portion of property taxes, an element also found in the House plan.
The income tax cut would save Georgia taxpayers about $215 million during fiscal 2009, which starts on July 1.
When fully implemented in fiscal 2013, the annual savings would be $1.2 billion.
The car tax repeal, with a two-year phase-in, would provide an estimated $672 million a year in tax relief when fully in place.