For Immediate Release – January 17, 2007
Contact: Jared Thomas, (404) 663-3646

To read the full study, click here.

ATLANTA – The complete phase-out of the onerous Georgia income tax would be achievable in just 13 years with a constitutional cap on the growth of state and local taxes and fees equal to the rate of inflation plus population. That’s the conclusion of a study released today by the free-market grassroots group Americans for Prosperity, which simulates how a Georgia Taxpayer Protection Amendment would stabilize the budget during periods of economic growth and recession and free up billions of dollars for tax relief by constraining the growth of revenue and spending.

“A Taxpayer Protection Amendment is designed to bring the sound budgeting that Georgia’s families practice everyday back to Atlanta,” said AFP-Georgia State Director Jared Thomas. “By placing a sensible limit on state and local governments’ revenue intake and forcing officials to save for the rainy days in Georgia’s future, the Taxpayer Protection Amendment would make a complete phase-out of our state’s burdensome income tax achievable within just 13 years.”

Thomas noted that a Taxpayer Protection Amendment actually improves on tax and spending limits of other states; notably, shrinking state spending from an economic downturn would be prevented through “rainy day” and budget stabilization funds that would keep government revenue at the pre-recession high-water mark until the state recovered.

The study was authored by the nation’s leading expert on tax and expenditure limits, AFP Distinguished Scholar and University of Colorado economist Dr. Barry Poulson.

Among the highlights:

• Had Georgia implemented a Taxpayer Protection Amendment in 1992 that was binding on both the state and local levels, by 2004 the budget stabilization fund for state and local governments would have amassed $2.1 billion and $32 billion would have been allocated to the tax relief fund.
• Had Georgia implemented a Taxpayer Protection Amendment in 1992 binding only on the state level, by 2004 the budget stabilization fund would have amassed $1.2 billion and $19 billion would have been allocated to the tax relief fund.
• Complete phase-out of the Georgia income tax would be possible by 2021 if Georgia implemented a Taxpayer Protection Amendment in 2008 that was binding on both the state and local levels. This conclusion assumes that surplus revenue above the expenditure limit is first allocated to an emergency and budget stabilization fund. When the 10 percent cap is reached on this fund the additional surplus revenue is then allocated to the tax relief fund, which is used to reduce and eventually eliminate the income tax.
• The most recent data suggests continued sluggishness in Georgia’s economic growth after the 2002 recession, which brought the first decline in per capita income in decades. Through the second quarter of 2006 Georgia’s per capita income growth ranked 37^th in the nation. In contrast, Florida, which has no income tax, has sustained rapid income growth in recent decades with per capita income ranking 20^th in the nation.
• The slow down in Georgia economic growth has coincided with an increasing tax burden on its citizens. In 1970 Georgia was a low tax state, with a state and local tax burden equal to 8.7 percent of personal income. By 2005 state and local taxes accounted for 10.5 percent of personal income, ranking Georgia’s state and local tax burden 24th nationally.
• Georgia’s personal income tax, which has increased more rapidly than income, is the main culprit behind the state’s increasing tax burden. The top rate of 6 percent kicks in at a relatively low level of income, $7,000.
• In terms of stimulating economic growth, the reduction in the Georgia income tax would best be achieved by first introducing a revenue-neutral, flat-rate income tax. Using the surplus revenue in the tax relief fund lawmakers could then “buy down” the rate of this flat-tax with the final goal of eliminating it.

“A Taxpayer Protection Amendment would help restore back-to-the-basics budgeting in Georgia state government,” Thomas concluded.  “By drawing a fiscal line in the sand that will stop government from growing out of control, the Taxpayer Protection Amendment would allow Georgia lawmakers to eliminate our burdensome income tax and deliver genuine economic growth and prosperity to citizens across our state.”

Americans for Prosperity (AFP) is a nationwide organization of citizen leaders committed to advancing every individual’s right to economic freedom and opportunity. AFP believes reducing the size and scope of government is the best safeguard to ensuring individual productivity and prosperity for all Americans. AFP educates and engages citizens in support of restraining state and federal government growth, and returning government to its constitutional limits. For more information, visit www.americansforprosperity.org
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