Tax reform
Notes from the Georgia State Senate
By STATE SEN. CHIP PEARSON

State Senator Chip Pearson

If you've been paying attention to the newspapers lately, then I'm sure you've heard some of the rumbling from across the state on a particular plan for tax reform. This plan, known as the GREAT Plan or Georgia's Repeal of Every Ad Valorem Tax, is being touted by House Speaker Glenn Richardson of Hiram as the way to bring Georgia's antiquated tax code into the 21st centuryS p e a k e been making appearances across the state, introducing this proposal to local politicians, business leaders and citizens. This week, I'd like to take a look at the plan, and what it could mean for Georgia citizens.

The GREAT Plan

* The plan has been introduced as House Resolution 900, and would appear as a ballot question requiring the approval of a majority of Georgia voters. The original piece of legislation would be amended and perfected in the legislative process before it comes to a floor debate in either house.

* The plan calls for a sales, use and services tax of four percent across the board at the point of final delivery

* The ad valorem taxes now being collected on all property, including land, houses, commercial property, inventory, autos, trucks, boats and planes, would be eliminated.

* Many different special tax incentives that have passed over the years would be eliminated

* The plan would incorporate an income tax credit for those who are hurt by any tax increase on items like groceries, prescription drugs, etc.

* The plan would help first-time homebuyers with much-needed property tax relief

* Some tax exemptions would remain in place on things like governmental transactions, agricultural products and raw materials used in manufacturing

* The proposal could help farmers and large land owners keep their properties in current use, which would mean more greenspace for all of us

* Local counties, cities and school districts are guaranteed to receive no less funding than they currently receive

* Proponents of the GREAT Plan say they are open and willing to work with all interested parties, such as local organizations and county commissioners, to perfect the plan.

Of course, this plan presents a somewhat drastic change in the way we pay our bills and manage our budgets, but tax reform ideas like this one reflect the many changes we've seen in our economy. The current property tax system was created when Georgia was an agricultural society and people made a living off of their land. The last overhaul of the system was 70 years ago, and since that time our economy has changed significantly. Home ownership has increased from 30 percent to 70 percent. We have moved from an agricultural society to a service-based society, as has the rest of the nation, and yet, we do not tax services at all.

Here are some facts about ad valorem taxation in Georgia that you might find surprising:

* The assessed values of property in our state has skyrocketed since 1999, with a total increase of approximately $100 billion

* Though property taxes were originally introduced to tax farm land, these taxes continue to be the primary revenue source for local governments. Currently, more than $8 billion in property tax revenue is collected annually in Georgia.

* Since 2000, the average annual increase in property tax revenue collection is 8.5 percent

* Currently, Georgia has a total of 1261 various entities with the taxation powers

* Property taxes are increasing much faster than personal income - from 1999-2005, personal income increased 147 percent, while property tax revenues increased 177 percent.

Like any piece of legislation, the GREAT Plan would have to go through the legislative process. Since HR 900 is a ballot question, it will require a "supermajority" or two-thirds vote from both the Senate and House. Whether the plan passes in the 2008 legislative session or not, one thing is clear - tax reform is on the horizon in our state. Whether it's the removal of the state income tax, ad valorem taxes or limitations on government taxation power, it is safe to say that we will see changes in the way we pay taxes in Georgia in the coming years.

As your representative in the Senate, I encourage you to familiarize yourself with Speaker Richardson's plan for tax reform, as well as some of the other ideas out there like the Taxpayer's Bill of Rights (SR 20) or the Georgia One Tax (SR 282). If you have any input on the GREAT Plan or any other tax proposal, I'd like to hear your views on the subject.