Less far-reaching than last year’s recent tax reform plan, Georgia legislators this week unveiled a number of changes to their sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. . There are some gimmicky ideas but many involve exempting business-to-business transactions, which is a move toward better taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. policy. A properly structured sales tax should tax all goods and services once and only once, but many states tax business purchases. By doing so, tax is paid when the business buys raw materials and again when it is sold at retail: multiple taxes on taxes, or “pyramiding.” This causes distortions and harms economic decision-making.
- Eliminate state sales tax on energy used in manufacturing
- Consolidates a patchwork of agricultural input exemptions into three general exemptions for energy, equipment, and other inputs (seeds, fertilizer, etc.)
- One percent tax exemptionA tax exemption excludes certain income, revenue, or even taxpayers from tax altogether. For example, nonprofits that fulfill certain requirements are granted tax-exempt status by the Internal Revenue Service (IRS), preventing them from having to pay income tax. of commercial aviation fuel
- Eliminates annual property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. on cars, replacing it with a one-time title tax
- Reduces income tax for married couples by increasing their personal exemption from $5,400 to $7,400
- Reduces conservation easement tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly.
- Caps retirement income exclusion at $65,000 ($130,000 per couple)
- Eliminates sales tax exemption for film production (while keeping the state’s popular but poor tax policy film tax credit)
- Two-year back-to-school sales tax holidayA sales tax holiday is a period of time when selected goods are exempted from state (and sometimes local) sales taxes. Such holidays have become an annual event in many states, with exemptions for such targeted products as back-to-school supplies, clothing, computers, hurricane preparedness supplies, and more. , a gimmick
- Orders out-of-state companies to collect online sales tax, which is unconstitutional
- Permits the state to waive sales tax on construction materials for select projects.