The Council's objective was to present a tax proposal that would help create jobs and move Georgia towards a fairer and more economically attractive tax structure for private citizens and businesses alike. This would be a revenue-neutral tax proposal; it is not intended to lower our tax base nor is it intended to raise state revenues, simply to make our tax code fairer, simpler and more attractive to the industries that create jobs.
Our job in the Special Joint Committee on Georgia Revenue Structure is to validate the Tax Council's research and mold its recommendations into one or more bills that will accomplish our main objective of creating more jobs for Georgians.
We believe the greatest way to pull ourselves out of this prolonged economic crisis is to provide our citizen workforce with high-paying job opportunities.
On Thursday, March 24, the Tax Reform Committee met for the fourth time to discuss the issues we face as we work to pass beneficial reform to Georgia's antiquated tax system. We focused on portions of the Tax Council's recommendation that we believe can be implemented immediately, resulting in the quick creation of jobs.
These initiatives are the result of the first comprehensive analysis of Georgia's tax code through the lens of new, global competition and a greater focus on technology-oriented job opportunities. Making these changes to our tax code will help Georgia recruit and retain quality industries who offer high-paying jobs.
We have, however, narrowed our focus to those portions of the Tax Council's recommendation that we feel we can effectively implement now, given the time constraint of our short 40 day session.
First and foremost, this bill will not eliminate the Senior Income Tax exemption. Rather, the proposal will maintain the current $35,000 ($70,000 for a married couple) exemption. Additionally, this bill will not tax groceries, prescription medicines, Girl Scout cookies, veterinary services, haircuts, AAA memberships or dry cleaning. Likewise, there will be no increase in cigarette taxes.
Research shows that the two most important factors for job creation are the tax exemption of energy used in manufacturing and a lower income tax. With this in mind, this bill will successfully accomplish a flattened personal income tax rate, lowering that rate by 25 to 30 percent.
These cuts have the potential to reduce some personal income taxes even lower than that. This will allow us to be more competitive with our neighbors to the north and south.
Tennessee and Florida have no personal income tax.
We are confident that we can achieve a rate much lower than Alabama's income tax rate of 5 percent. As we lower our income tax rate, we will also uphold the current tax deduction for contributions to college savings plans and will not touch the current Social Security deduction.
The other equally important job-creating aspect of this bill is the elimination of the sales tax on energy. By taking this vital step, we will encourage business growth throughout our state, making Georgia more attractive to companies that are considering relocation.
Right now Georgia is one of only 14 states in the nation that imposes a sales tax on energy used by manufacturing companies. In the Southeast, only Georgia and North Carolina tax the energy that manufacturers use, and North Carolina does it at a reduced rate.
Manufacturers are among the largest users of electricity and natural gas and energy costs are often cited as the single largest expense in the manufacturing process. By eliminating Georgia's energy tax, Georgia instantly will become more competitive as we recruit industries - and their jobs - to this state.
In order to reduce the income tax and eliminate the energy tax, this bill broadens consumption taxes. This move brings us in line with modern tax-code philosophies which more accurately reflect the wishes of taxpayers today.
The bill seeks to bring uniformity to the various taxes and fees on telecommunications services. At the same time, we will remove the telecom tax on capital investment. This will encourage increased investment in broadband and wireless capacity which will bring more telecommunication access to Georgia's rural areas which also increases our appeal. As telecom capital investments increase, job opportunities will likely increase. North Carolina, Virginia, and six other states have already implemented similar flat communication taxes.
The new consumption taxes will also include taxes on automobile repair services and casual sales of motor vehicles. It is important to note that Georgia currently taxes parts used in auto repair and at least 21 other states tax the labor, including Florida and Tennessee. Georgia joins 44 other states that already tax casual sales of motor vehicles. We do not intend to tax motor vehicle transfers between immediate family members.
Again, this is not a tax-increase bill. Any new consumption taxes are offset by reductions to the state income tax. Many had hoped that the recommendations of the Tax Council would generate additional revenue for the state. However, our objective from the beginning was not to generate new revenue but to shift taxation from earnings to spending and create jobs.
Next week, the bill will be introduced in the House of Representatives and will begin to make its way through the legislative process. I am encouraged by the progress we have made in revitalizing Georgia's tax code, especially since the Tax Council was formed just last summer. As co-chair of the Special Joint Committee on Georgia Revenue Structure, I am sincerely dedicated to achieving tax reform that will benefit all Georgians. As always, I am honored to serve the constituents of the 31st District and I encourage any questions or suggestions you may have regarding legislation in Georgia General Assembly.