Search This Blog

Friday, June 11, 2010

Georgia Tax Reform Committee - HB 1405 enacted

Georgia lawmakers have created the 2010 Special Council on Tax Reform and Fairness. HB 1405 calls upon this special committee to study the state's tax laws and issue a report of its findings and recommendations by January 10, 2011. The legislation also creates the Special Joint Committee on Georgia Revenue Structure that will work in 2011 to introduce legislation comprised of the Council's recommendations.

The Special Council is comprised of these 11 members:

  • 4 named economists from 4 universities
  • Governor Sonny Perdue
  • 2010 chairperson of the Georgia Chamber of Commerce
  • 2010 Georgia chairperson of the National Federation of Independent Business
  • 2 members appointed by the Lieutenant Governor
  • 2 members appointed by the Speaker of the House

Per an article in the Atlanta Business Chronicle - "Tax reform will impact many Ga. businesses" (6/11/10), tax issues in Georgia include lack of accountability measures for various tax breaks, an out-dated tax base and volatility. According to HB 1405, it has been "many years" since there was a "systematic" review of Georgia's tax system.

Well, it can't hurt to find some way to review a tax system and find ways to improve it. The downside is that like so many tax study commissions, a report will be prepared that then sits on the shelf. It is good that HB 1405 includes a mechanism to be sure the recommendations get to the legislature in legislative format for discussion.

In 2008 when Governor Schwarzenegger and Assembly Speaker Bass announced a tax reform commission (the Commission on the 21st Century Economy), I wrote an op ed describing six factors that would likely increase the effectiveness of a tax study commission and its findings. I've listed them below and ranked the Georgia approach against them.

  1. Serious commitment - MET - It is a good sign that the commission was created by the governor and legislature. Also, including a mechanism in the bill to require legislative attention to the recommendations is good. One missing element is a requirement for the legislature and governor to specifically state why they will not enact any particular recommendation offered by the commission (so the public knows and to ensure that there was discussion)
  2. Able, willing and non-partisan commissioners - MOSTLY MET - It is good that there are four economics faculty participating. There are also two business leaders. Missing from the group and hopefully the remaining four appointees could include tax practitioners. Tax advisers know best where there are complications and oddities in the law and where taxpayers struggle, where they make decisions not to do business in Georgia (perhaps) due to tax issues, etc. Adding at least one tax professor from a graduate tax program or a law school would also be a good idea.
  3. Principles and goals - NOT MET - HB 1405 is very general in what the commission is to do and how its work is to be accomplished. A reminder that they should be guided by the principles of good tax policy would be helpful. Also, what are the goals for the state? Are they aiming to attract high tech businesses? have a highly educated workforce? reduce poverty levels? what?
  4. Reality - TO BE DETERMINED - Taxes must make sense for the system to be respected such that compliance is high. An approach that might make great economic sense but is too difficult to comply with won’t be a lasting change. Also, change can’t happen overnight so transition rules must be considered. The commission needs to consider how ways of doing business and how we live have changed since many of Georgia's tax laws were put in place. The laws of other states should also be considered given the mobility of capital and labor today and the reality that some business can be conducted remotely and virtually.
  5. Time-saving background work - TO BE DETERMINED - There are numerous reports from other states, think tanks, business and government organizations, and academics that can help the commission with its work. Also look at the recent tax commission work in Minnesota and California and what happened and why to see where lessons can be learned.
  6. Public education - NOT ADDRESSED - Concurrent work is needed by the legislature and tax agencies to help the public understand current tax problems and their direct and indirect effects on their lives and the state. This will help ensure that the commission’s recommendations get the careful consideration they’ll need in order for tax system modernization to become a reality.

Full text of my article: "A Tax Commission for California? How It Can Be Made to Work," California Progress Report, 7/27/08.

We'll see what happens.

1 comment:

Professor Nellen said...

I found an article in the Atlanta Business Chronicle (6/16/10) reporting the names of the four remaining commission members. Here is the link -

The four are business folks including one from a CPA firm. I think it is a good idea for any tax reform commission to have tax practitioners - and economists. With the law becoming more and more complicated, practitioners can shed light on the compliance costs and problems and share views of taxpayers. It would also be good to get input from folks running low-income tax clinics and VITA sites.