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Debate simmers about proposed GREAT plan A plan to eliminate property taxes in Georgia and replace them with sales and service taxes is stirring debate across the state this summer. House Speaker Glenn Richardson, R-Hiram, said an overhaul is needed for the unwieldy system that allowed a 176 percent increase in property taxes since 1990 compared to a 146 percent rise in personal income. But some local officials are viewing the proposal as a transfer of power to the Georgia General Assembly. "It's a good political ploy, but it's not good policy," Rome Mayor Ronnie Wallace said. "It places all control of locally created revenue in the hands of the state legislature." Floyd County Commission Chairman Jerry Jennings also cited concerns about the loss of home rule and the instability of relying on a single revenue source. "You need a variety of revenue streams in case you have a problem with one," Jennings said. "In the (2003) recession in Georgia, sales tax revenue dropped dramatically. But the hit wasn't as bad as it could have been because we had other sources." House Resolution 900 Richardson introduced House Resolution 900 in the closing days of the General Assembly session in preparation for early action when the legislature reconvenes Jan. 14, 2008. Presentations to the Georgia Chamber of Commerce, House members and other groups already have sparked some changes. The name of the initiative also has been changed from the flat or fair tax to the GREAT Plan - Georgia's Repeal of Every Ad valorem Tax. "I know this will continue to evolve between now and January, but I think we have to take a serious look at ad valorem taxes," said state Rep. Katie Dempsey, R-Rome. "It's sort of a tax for doing well. We have to figure a different way to provide the resources we need." Instead of levying state and local taxes on tangibles - land, buildings, inventory and vehicles - a state tax would be collected when goods and services are exchanged. Cities, counties and school systems would get annual allocations based on a formula the legislature would create. If passed with a twothirds vote of the General Assembly, HR 900 would set a date for a statewide vote on the massive change to the Georgia Constitution. Dempsey said current plans are to put it on the ballot for the November 2008 general election. Taxing services Retail sales are taxed now, but a new tax on services would have to be added to the mix in order to generate enough replacement revenue. Dempsey, who's been collecting comments from the business and government sectors, said the addition is raising some concerns. Haircuts, day care, real estate transactions, car washes and counseling sessions are among the purchases where consumers could see a 4 percent tax added to the bottom line. But supporters note the country has shifted to a service-based economy in the decades since the tax structure was created. "It is the 21st century," Richardson wrote in a commentary published Thursday in the Athens Banner- Herald. "It is time to go to a system that taxes the receipt and exchange of money, not the ownership of property." Revoking exemptions HR 900 also calls for revoking all sales tax exemptions, although Richardson referred Thursday to eliminating "many" of the exemptions granted during the years. Sales tax accounted for $5.2 billion - equal to 34.3 percent of the state government tax revenue - in fiscal year 2005, according to an analysis by William J. Smith and Mary Beth Walker for the Andrew Young School of Policy Studies at Georgia State University. But the report estimates exemptions ranging from food items to industrial machinery reduced state revenue by $9.8 billion in fiscal year 2004. The analysis indicates that, if the exemptions were eliminated, sales tax could drop to 1.33 percent from the current 4 percent without a drop in revenue. Or removing the exemptions could allow governments to cut property taxes, Wallace said. Local taxes The original legislation spelled an end to local option sales taxes, including SPLOSTs and the E-LOSTS dedicated to school construction projects. Local governments also would have been prevented from issuing bonds to pay for large projects such as new roads or water treatment plants - because they no longer would have the taxing authority to back the debt. Dempsey said the local options have been reinstated, although approval would be needed from the General Assembly and at least 60 percent of local voters. "It still gives you that local control but with a higher threshold," she said. "It just means there's a little more community buy-in to raising those taxes." Local control Local officials, however, expressed more concern about getting sufficient state funds to provide standard services to residents. "The plan is changing almost daily, so we don't really know what will be in there, but the concept of all school funding being doled out by Atlanta is of concern," Floyd County Schools Superintendent Kelly Henson said. "We see some potential problems with that." Questions also have been raised by the Georgia Municipal Association and the Association of County Commissioners. Wallace noted that, in recent years, the state legislature has absorbed into its general fund the locally funded solid waste and hazardous waste clean-up funds. And the state has yet to refund the $47,082 it collected in unauthorized addons to Rome's red light camera citations - although the motorists were reimbursed with city funds last July. "What mechanism for review or response do the local governments have?" Wallace asked. "This (plan) would create an environment where some communities would become donor communities to the state." Jennings complained that the legislature gave state employees a 3 percent raise for this fiscal year but funded the Floyd County Health Department at less than a third of the amount needed to cover the increase. "It's frustrating," he said. "So for us to support granting the state more power over what happens in local government is just ludicrous."
Publisher's note: The previous article was written by staff writer Diane Wagner and appeared in the July 15, 2007 Rome News- Tribune.
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