Feburary 15, 2013
It is a pleasure to once again give you an update on the past week’s activities in the state legislature. The most significant legislation passed this week was HB 80. This bill corrected some problems with the "title tax on automobiles" portion of the tax reform bill passes last year.
I serve on the Ways & Means committee which writes the tax laws for the State of Georgia. Ways & Means handles more bills than any other committee and as you might imagine, consumes much of my time. We all see a lot of changes that we would like to make in Georgia's tax laws, but few can see the problems, or unintended consequences, that changes in tax law can potentially bring.
The tax reform package passed last year is a good example of the challenges we face. The tax reform was designed to be tax neutral by providing tax cuts in areas that would stimulate the Georgia economy and increasing taxes in some areas to bring some tax equity. The tax cuts we implemented included removing sales tax on energy used by manufactures, which would give our Georgia industry an equal footing with their competitors in neighboring states. The major tax increase was placing a sales tax on Internet sales by out of state vendors when selling to Georgia residents, thus making it a little more equitable for our local retailers when competing against Internet marketers.
Last year’s tax reform package also included changes in the taxation of automobiles. The ad valorem taxes on cars is eliminated for new purchases and the 7% sales tax on purchase of an automobile has been eliminated, and replaced with a 7% title fee - which on the surface is an even swap. However, that 7% title fee will apply to “casual sales,” which is the term used to describe sales other than from a dealer.
All of this may sound quite simple, but some of the Internet marketers do not want to follow the Georgia law which is likely to result in drawn out litigation. The auto tax changes bring some scenarios that were not envisioned when the bill was written. We corrected some of those with HB 80, and I expect we will be addressing this code section again as other problems are brought to light.
Another issue that has consumed much of my time has been funding of our education systems and in particular our smaller systems and those systems that are defined as having “low wealth.” Low wealth is determined by comparing the ad valorem tax digest with enrollment.
Most of our systems in South Georgia are considered “low wealth” because of high enrollment and the limited value of our property. Last year the formula for determining low wealth was changed and the amount of money put in that program was reduced. In the 2014 budget, which begins July 1, 2013, the governor has recommended increasing the funds for the equalization grant and I am in full support. However, the governor has also recommended eliminating the sparsity grant for the smaller systems, which I oppose.
I have come to realize that when we lobby for things like the equalization grant and the sparsity grant, it comes across to many as if we were pleading for welfare. I firmly believe that most of my colleagues have a sense of fairness and seek justice, but many feel we have too much welfare. I have been having some success with a different approach. As opposed to begging for welfare, I have been pointing out that some of our other funding sources are grossly inequitable to our less wealthy systems. The e-SPLOST tax generates money for the system in the counties where the money is spent without regards to where the people paying that tax may live and educate their children. Data from the Department of Education provides the following examples:
$ coming in/ $ coming in/
Above/(Below) (going out) (going out)
Splost/ State average of County of County
Splost FTE FTE Splost/FTE 1% Splost 3% Splost
Echols Co. 164,111 772 212.58 -707.22 -545,974 -1,637,923
Brantley Co. 1,066,140 3,384 315.05 -604.75 -2,046,463 -6,139,388
Lanier Co. 561,019 1,617 346.95 -572.85 -926,297 -2,778,892
Atkinson Co. 713,597 1,655 431.18 -488.62 -808,672 -2,426,016
Pierce Co. 1,661,818 3,505 474.13 -445.67 -1,562,081 -4,686,243
Clinch Co. 674,314 1,296 520.30 -399.50 -517,747 -1,553,242
Charlton Co. 1,108,959 1,636 677.85 -241.95 -395,834 -1,187,501
Fulton Co. 130,265,771 91,239 1,427.74 507.94 46,344,139 139,032,416
FTE stands for “full time equivalent” but for practical purposes can be considered as enrollment.
This chart is based on assumptions that 1- the population of these counties are in proportion to the FTE (enrollment) and 2-the sales taxes paid per capita in each county is the same. The first assumption would produce a little variation, but not much. Correcting for the second assumption would alter these figures dramatically because the average income in Fulton County is higher than the average income in these smaller counties. The adjusted figures would be closer than most would think, for the latest figures I have shows the median family income in Echols County as almost $21,000 and Fulton at just over $28,000.
These figures, while not perfect, are good enough to show that these small counties are sending a lot of tax dollars out of their counties into the rest of Georgia and it not welfare when the state puts money back in programs that are designed for their benefit.
I look forward to keeping you posted throughout this session.
Bills that have been filled up to this date can be accessed on our web site: www.legis.state.ga.us
Please feel free to call whenever I can be of assistance.