VALDOSTA — Georgians will have a unique opportunity in November to distinguish itself from all other states in the Union. That opportunity comes in the guise of an amendment to Article VII, Section 3 of the Constitution of Georgia which addresses the state income tax. If it passes, Georgia will be the only state to enshrine an income tax cap in its constitution.
The official text of the ballot summary, meaning the wording that will appear on the November general election ballot, asks: “Shall the Constitution of Georgia be amended to prohibit the General Assembly from increasing the maximum state income tax rate?” The question provides for a “Yes” or “No” response.
The actual change adds a new paragraph (Paragraph IV) to Section 3 of Article VII which would read: “Increase in state income tax rate prohibited. The General Assembly shall not increase the maximum marginal rate of the state income tax above that in effect on January 1, 2015.”
The current marginal rate is 6% and is not likely to change before January 1, 2015.
While this will not make Georgia the state with the lowest such tax rate among its neighbors (Florida has no state income tax, Alabama’s is 5%, Tennessee only taxes investment income at 6%, and South Carolina’s top rate is 7%), the cap enjoys broad support among all age groups, men, women, Republicans and Democrats. Fifty-seven percent of voters, in fact, support the idea.
The brainchild of State Senator and Senate President Pro Tempore David Shafer (R-Duluth), the ballot initiative has the blessing of over 17 economist throughout the state including many in academia. The reason?
It lends stability and certainty in the business environment since businesses looking for a new home or looking to expand want to take as much political risk off the table as possible. Knowing that something as certain as death (like taxes) is controlled, raises their comfort level since they deal with other risks….like labor, sales and marketing.
Georgia recently replaced Texas as the top state in the nation within which to do business. Business incentives, revamping the workers’ compensation scheme and a ready labor force were all contributing factors to that success. Capping the state income tax is seen as a huge buttress to keep that momentum, according to the economists.
Here’s what Jeffrey Dorman, agricultural and applied economics professor at the University of Georgia, had to say about it, “It has to do with credibility. If businesses feel that they can trust you, then they’re more likely to create jobs in your community. This cap signals to business, ‘We promise we’re not going to become [the next] New York, California or Illinois. We’re going to remain a good place to do business.’”
And this is huge.
It is huge because of who it benefits. According to these economists those beneficiaries are the lower to middle income workers. While these jobs may be the first to evaporate in a down turn, they also come back, according to Christine Ries, an economics professor at Georgia Tech. And when pro-growth tax reform is enacted, she claims that those employers tend to create not only entrance level jobs, but also positions that the employers need to foster growth, the $30,000-a-year jobs, the next rung on the ladder.
There are risks in chiseling the marginal tax rate in stone. But there are risk to any policy, taxing or otherwise. The upside, however, far outweighs any risk regarding the this proposal.
Senator Shafer is a thinker. His proposal hits the ball out of the park and Georgia voters need to bring it on home in November (or earlier, beginning October 13) by voting “Yes” on Amendment “A”
Gary Wisenbaker, B.A., J.D. is a native of South Georgia where he practiced law in Valdosta and Savannah for 31 years. He has served as state Chairman of the Georgia Young Republicans and Chairman of the Chatham County (Savannah) Republican Party. Gary is a past GOP nominee for State Senate, past delegate to the Republican National Convention and has chaired or co-chaired numerous Republican campaigns for President, US Senate on the county and district level as well as local campaigns. Gary hosts his own blog at www.garywisenbaker.com