Speaker Glenn Richardson came to Richmond Hill on Thursday, Nov. 15, to speak to local Rotarians about his proposed House Resolution 900, which seeks to eliminate property taxes in the state of Georgia.
Richardson, who has been referred to as an ‘agent of change,’ said he could’ve decided to take office and do nothing. But instead, he said it’s his job to evaluate how the state government is impacting the residents of Georgia.
"I think we’re elected to look at what we’re doing and ask, is this the best way to deliver services to our citizens?" Richardson said. "Local governments have said, ‘How dare I change their system of governance. How dare anybody from the state propose change?’ And I look at them and say, ‘How dare anyone stop the people from determining their system of governance.’"
While skeptics point to flaws in the plan, including a potential loss of local government control over tax dollars and billions in budget shortfalls from the loss of property tax revenue, Richardson said his plan will work.
"You can have a system that funds local government based on a consumption/sales tax that’s pay-as-you-go, and get rid of property taxes. We call it the GREAT Plan," he said.
The basics of the plan come down to one simple question in Richardson’s eyes: Do Georgians want to change from what’s been done for the last century to a new system? Richardson pointed out the tax system in Georgia was created in 1848, when income, sales and property taxes didn’t exist."Should the Constitution of Georgia be amended so as to provide the elimination of all property taxes in the entire Ad Valorem system of taxation, in favor of a sales use and services tax set forth in the GREAT Plan for Georgia?" he asked.
Public Information Manager Amy Henderson of the Georgia Municipal Association (GMA) said there’s a more important question Georgians should be asking themselves: "Do I trust the state government to collect all the revenue and provide the funds needed to pay for education, public safety and the quality of life I enjoy now?"
Richardson’s figures show that total revenue in Georgia went from $8.2 billion in 2005 to $9.7 billion in 2006.
"His claim that property taxes increased by $1.5 billion from 2005 to 2006 are not accurate. Property taxes in 2005 were $8.85 billion; in 2006, they were $9.67 billion, a difference of approximately $8.2 million, according to the state Department of Revenue," Henderson said. "It should be a red flag to taxpayers that incorrect figures are being used to support this plan. Should it be implemented, it will take a complicated formula to redistribute the funds to communities around the state. How can we trust the math on a complicated redistribution formula when we can’t trust the basic math of how much is currently being spent?"
Richardson said either way, the current system funds local government with a method that is "unfair, inequitable and out of control," pointing out property taxes are outpacing the ability of people to pay it with raising revenues.
"You get your property tax bill each year and you’ve got two clear choices. You can either pay it or not. You pay it, and you get along. You don’t pay it, we take your house. With a consumption tax, you go to the store and you say, ‘I don’t want to pay that tax,’ so you don’t buy it," he said.
Richardson said there is no single explanation, but the fact that the economy has changed so drastically since the taxation system was first enacted is a sign that something needs to be done.
"We only tax about $142 billion from goods, and there is $140 to $240 billion dollars in services that we don’t tax at all. You see, in the year 1850 the only thing we had to tax was crops. In 2007, we don’t have crops, we have services, yet we don’t tax them at all."
His philosophy for government is to follow the mindset of the average businessman or citizen.
"When your business has less money, you tighten your belt and you cut back. When your family has less money, you tighten your belt and you cut back. And when the economy goes down, government should get less money and cut back," he said.
Richardson thinks that logic is wrong and his whole proposal is for change; to get people thinking. Instead of exemptions and value caps, his plan is for everyone to participate in paying sales tax.
"If you’re going to tax anything, why don’t we tax everything?" he asked. "If we go from a system of a few paying a lot, to a lot paying a little, we’re going to be better off."
While almost all exemptions would be eliminated under this plan, Richardson said lower-income residents would be eligible for a tax-refundable credit on groceries and prescription drugs that would be provided by filling out a Georgia income tax return.
Richardson said he wants to try something different instead of continuing down the same road.
"Do we want to keep taxing people’s houses? Or do we want to tax consumption? Yes or no. I’m out promoting change. And I’m promoting letting people decide," he said. "Twenty five years ago we didn’t have the lap top computer. Ten years ago, we didn’t have these devices called Blackberrys. Technology is coming around and changing rapidly. We’ll very soon be more service-oriented than we are today. What are we going to do then? Are we still going to tax people’s dirt, where they live? I say no. I say it’s time to change. It’s time to put it on the ballot."
He said he’s going to continue pushing it, but is open to considering eliminating parts of the property tax system and phasing it.
A sunset provision was one Rotarian suggestion, and Richardson said it’s a good idea they’ve contemplated already.
"Why don’t we say we’re going to go to this system, but in two years or three years, this system ends. So if it’s not going so well, it’ll end on its own and in order to continue it, it would have to go back to voters. That’s one of our fallback positions," he said.
Rotarian Laura McGee, an accountant, wondered what the estimated cost of implementing the plan and getting all businesses registered with the Department of Revenue would be, and what it would take to get the small service providers into compliance.
"There’s no way to estimate. You see, most of those people (like a housekeeper or babysitter, for example) aren’t reporting that as income now anyway. So they’re not in the numbers I showed," Richardson said. "The implementation for most businesses, I think it’s not as severe as some people think. For attorneys or accountants, that are primarily service oriented, it’ll be an education effort. But there’s lots of businesses out there that are what I call hybrids: mechanics, plumbers, electricians, hairdressers – they already collect. If you get a haircut and buy a product, you pay sales tax on the product and they’re already reporting that," he explained.
Steve Scholar raised the question of federal and income tax returns, which currently give refunds on property taxes in itemized returns. He also wanted to know if there have been any cost analyses under the proposed tax shift for how it would impact an average Georgia family.
"No one can agree on what their level of consumables is. It’s different for every family," Richardson said. "Losing deductions, if that’s the worst that happens in this, that’s a good thing.
"I think you and I agree that tax reform is important," Scholar said. "I guess for me, it’s not hard to endorse letting people make their own decision. It’s hard for me to endorse your plan, without knowing exactly how it’s going to affect me."
Richardson replied that if every Georgia resident addressed government this way, nothing would ever get done. "You cannot change a tax system without affecting me’s on this side, and me’s on that side," he said, admitting the plan is going to be a "tough sell," but he feels a modified version is likely.
Jack Hyde applauded Richardson for thinking outside the box.
County officials including Administrator Phil Jones and Commission Chairman Jimmy Burnsed were also in attendance
"He paints a picture that it’s all (local government’s) fault. It’s accusatory that we overspend," Jones said.
"I appreciate a proposal to get people talking," he said. "But we need to figure out some methodology."
Jones said he likes the concept of phasing the plan in, but that this is a big change and he’s afraid of having radical change in the system. He also has concerns for low-income families, even with a consumption credit coming back after filing taxes.
"If you don’t have that money, how do you get through a whole year without it, to get to that point where you’re getting your refund?" he asked.
Burnsed said he agreed with Richardson’s assessment that the Ad Valorem tax is "broken," and unfairly administered. But Burnsed said the new plan must be uniform.
"I’m not against change, but it needs to be a system that will work and replace all those Ad Valorem tax dollars," he said.
Richardson’s numbers for the plan were figured by Economist Arthur Laffer, who is best known for his work as an economic advisor for Ronald Reagan. To see calculations and more information about how the proposal has been laid out, visit www.theGREATplanforGeorgia.com.
See video of Richardson's speech to Rotary at bryancountnews.net.