Research & Commentary: Georgia Tax Reform

Published March 29, 2011

The Special Council on Tax Fairness for Georgians was established to conduct a study of the state’s revenue structure and make a report of its findings and recommendations for legislation. On March 28, after months of wrangling, the Joint Committee on Georgia Revenue Structure reintroduced a proposal to lower the state’s income tax rates while eliminating deductions and expanding the sales tax base.

The proposal would lower the personal income tax rate by 25 percent, remove the telecom tax on capital investments, and eliminate the tax on energy used by manufacturers. Each of these changes would make the state a more attractive place in which to work and do business.

When considering tax reform, it is important to ask whether it adheres to four essential principles of sound tax policy:

* Taxes should be applied to a broad base.

* They should be kept at or trimmed to a low, competitive rate.

* They should not distort economic choices.

* They should be transparent to taxpayers.

The tax reform proposal being considered generally adheres to these principles, and in a revenue-neutral manner. By lowering tax rates and simplifying and broadening the state’s tax system, the reform would encourage economic growth and make future budgets more predictable.

Currently, Georgia’s income tax is uncompetitive with those of its neighbors, two of which have no income tax at all. Although tax reform is rarely easy or done perfectly, it can reap positive results for a state still struggling to crawl out of the recession.

The following articles provide additional information on tax reform and Georgia’s fiscal situation.

Ten Principles of State Fiscal Policy
This booklet provides policymakers and civic and business leaders with a highly condensed yet easy-to-read guide to state fiscal policy matters. It presents the ten most important principles of sound fiscal policy, from “Above all else: Keep taxes low” to “Protect state employees from politics.”

Research & Commentary: The Best And Worst Ways to Eliminate a Budget Deficit
This Research & Commentary, written by The Heartland Institute’s Budget and Tax Legislative Specialist John Nothdurft, takes a look at some of the best and worst ways states use to trim their budget deficits.

State Budget Shortfalls Present a Tax Reform Opportunity
This special report by the Tax Foundation outlines how states with tax codes relying on small tax bases are more susceptible to large budget deficits. It points out that eliminating tax favors, lowering tax rates, and broadening tax bases can lead to a more sustainable and economically appealing tax code.

Issue Analysis: Analyzing Georgia’s Tax Reform Proposal
The Georgia Public Policy Foundation analyzes the state’s tax reform proposal and the changes made to it, noting, “Fiscal conservatives were concerned this was a large tax increase, even though the Tax Council emphasized its goal of making the proposal revenue-neutral. The intent of the Council was for lower tax rates to offset additional revenue.”

ATR Supports Revenue Neutral Tax Reform in Georgia
Americans for Tax Reform confirms that supporting Georgia’s tax reform proposal would not violate the Taxpayer Protection Pledge made by 54 Georgia lawmakers.

The Flat Tax: Will It Be Coming to Your State?
This Heartland Institute Research & Commentary explores the growing trend of states and nations moving toward flat-rate income-tax systems.

A Brief Guide to the Flat Tax
Everything you wanted to know about the flat tax, from Dan Mitchell at The Heritage Foundation. Among the benefits of the flat tax: It eliminates special-interest favoritism and prevents taxpayers from scamming by hiring enough lawyers, accountants, and lobbyists.


For further information on this subject, visit the Budget & Tax News Web site at, The Heartland Institute’s Web site at, or PolicyBot, Heartland’s free online research database, at

Nothing in this message is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. If you have any questions about this issue or the Heartland Web site, contact Legislative Specialist John Nothdurft at 312/377-4000 or [email protected].