Tough times require tough decisions, Part II: Three ill-conceived tax ideas, two of have or will fail and the third now being law.

The previous post entitled concluded:

"If state revenues do not start to normalize by next year, the 2011 budget will force some very difficult choices. Raising taxes would certainly be the last option you would want to pursue in a recession."

I have been a school board attorney for many years, and folks, in the school business, as in city, county and state government, we are close if not past the point where we are just cutting fat.

We are fixing to witness the cutting of muscle and bone, just as is going to be experienced in California's dysfunctional situation of making it almost impossible to raise taxes (see 7-22-09 post entitled "From the Tarnished Golden State, Lessons for Washington -- The state that can't").

The Ox wants to get rid of the state income tax. See 4-26-09 post entitled "Oxendine wants to get rid of State income tax".

This is dumb. As that post noted:

Statements made during the interview by state Insurance Commissioner John Oxendine on state taxes most assuredly will come back to bite him in the rear as the campaign kicks into full swing.

Perhaps ignoring the exit of Lt. Gov. Casey Cagle from the race from governor and wanting to one-up Cagel, Oxendine called for eliminating not just the corporate income tax, but all income taxes.

Cagel, you recall, during this past legislative session sought to end Georgia's corporate income tax, which in better times has helped fill the state's coffers with more than $700 million each year. Cagel said wiping out this tax would help Georgia stay competitive with neighboring states.

That post goes on to provide:

This position was the subject of a 2-22-09 post entitled "This is irresponsible. Ga. governments -- the state, counties, cities & school districts -- needs more revenue, not less. - Corporate tax breaks urged," that provided in part:

"At this particular time this attempt is irresponsible. The State of Georgia, cities, counties and school districts need more tax revenues, not less.

"I have been the attorney for the Douglas-Coffee County Economic Development Authority for years, and our success in recruiting industry is the envy of many Georgia cities and counties. Never has our corporate income tax, to my knowledge, even been brought up as a problem or consideration by any company we have recruited."

And just as the Ox had a dumb idea -- and even though in the Other Georgia many dread receiving their property tax bills more paying income taxes -- House Speaker Glenn Richardson's plan for swapping property taxes for an enhanced state sales tax was just as ill-conceived as it was popular with counties, cities and school districts which joined forces to oppose it.

We witnessed the plan crash and burn despite a carefully orchestrated statewide series of public hearings designed to promote the concept.

And as noted in my 4-26-09 post linked above:

And, as noted in a 7-19-08 post entitled "The Speaker's plan for swapping property taxes for an enhanced state sales tax might have been a fiscal disaster this year if it had been in place":

James Salzer writes in the ajc's Political Insider [this was during the absence of Jim Galloway]:

The original plan proposed by House Speaker Glenn Richardson last year - swapping property taxes for an enhanced state sales tax - might have been a fiscal disaster this year if it had been in place, according to critics of the plan.

Sales tax collections were down 8.6 percent during the final quarter of fiscal 2008 compared with the same period in 2007. Sales taxes are currently the second most important source of revenue for the state, just below income taxes. With the economy slowing, sales have fallen faster than income.

That is exactly the scenario that critics of Richardson’s plan warned of.

That was 2008. 2009 would have been a fiscal disaster.

A third ill-conceived tax idea is now law. In early May Governor Perdue signed House Bill 233, freezing property tax values at 2008 assessments for three years, effective back to January 1, 2009, in other words, effective immediately.

Pickens County Chief Tax Appraiser Roy Dobbs has been critical of this legislation, noting in the Pickens County Progress:

[T]he bill will ultimately not lower property taxes as touted by its supporters.

“Tax bills are dictated by budgets.”

Dobbs said especially in a year when the state is cutting back allocations to counties for road paving, the idea of freezing values was poorly thought out. He said they are virtually guaranteeing that local government will be forced to raise tax rates to cover the loss from frozen values and fewer state grants.

“Property taxes are not being frozen,” he said. “It’s only the assesments.”

Dobbs noted that the initial legislation calls for the freeze of values at 2008 levels to last for three years. New construction or sales will still prompt a re-assessment.

Under House Bill 233, generally speaking, the only exceptions to an increase from the 2008 assessment are a "manifest, factual error or omission in the valuation of the property." While residential (and most commercial) properties have gone down rather than up during the current recession, this legislation could hamper needed reassessments.

California and Florida went down this route, and it did not work. Maybe our legislators will see the error of their ways.

So if we are in a situation where the State of Georgia, cities, counties and school districts need more tax revenues, not less, is there a fair source of additional revenue? I think so, and lies in examining what should be exempt from the state sales tax.

This is the topic of "Tough times require tough decisions, Part III," the post that follows.