April 11, 2013

David Pennington: 40 days of disappointment

— The 2013 legislative session disappoints because for the third year running our leaders chose the easy path of incremental change over the challenging path of bold, comprehensive change. The result: Our two biggest issues — sluggish economic recovery and rapidly rising poverty rates — have not been substantively addressed.

Consider that Georgians rank 50th in financial security. Our labor participation rate of 58.2 percent compares to the national rate of 63.3 percent, which is the lowest since 1979. The percentage of our population earning the minimum wage has increased from 3.3 percent to almost 10 percent — twice the national average. In the first eight months of fiscal year 2013, Georgia’s gross sales and use tax is up by only 1 percent. Considering population increases, we are at best holding our own and perhaps losing ground.

What’s changing in 2013

Hope Grant reversal: Reversing his 2011 decision on the Hope Grant, Gov. Nathan Deal supported changing the grade point average requirement for technical college students from 3.0 to 2.0. Democratic Rep. Stacey Evans initiated the change because without this financial support the technical college student population dropped by almost 25,000. Georgia badly needs to increase her skilled workforce to fill existing jobs and to attract new jobs. We’ve lost precious time.

Taxes on energy used in manufacturing: In 2012, our leadership agreed that Georgia’s sales tax on energy used in manufacturing hampers our ability to entice industrial expansions and new construction. But rather than eliminate it and give Georgia a big competitive boost, they decided to phase in the elimination over four years beginning in 2013. Since Georgia is one of only 14 states with this tax, our competitive position for good-paying manufacturing jobs continues to lag.

New vehicle taxes and transfer of taxing authority: As of March 1, 2013, sales tax and the hated “birthday tax” on vehicles were replaced with a one-time 6.5 percent Title Ad Valorem Tax (TAVT). Georgians are learning the hard way that this 6.5 percent tax applies to private vehicle sales, which comprise 60 percent of all vehicle sales. New Georgians are learning the hard way that this 6.5 percent tax applies to vehicles they bring to Georgia. In both cases sales tax has already been paid. There is more bad news. The TAVT will increase to 7 percent in 2015, after which an unelected state revenue commissioner can increase it to a maximum of 9 percent. This bill continues to consolidate more power in state government and away from local governments.

Hospital bed tax extension and transfer of taxing authority: In 2013, taxing authority for the so-called hospital bed tax was given to an unelected board that can raise it from the current 1.45 percent to 6 percent without legislative approval. Businesses bear the brunt of this $240 million tax that could increase to $1 billion. The level of taxation is linked to Medicaid spending which is certain to continue rising due to Georgia’s economic woes.

Taxes to fund venture capital: $100 million of your tax dollars (over five years) will capitalize the new venture capital Invest Georgia Fund. The governor, lieutenant governor and speaker of the house will each appoint a member to the Invest Georgia Board which will oversee the fund. New or existing businesses can apply for these monies. A recent example of Georgia’s venture capital investment performance is range fuels that closed down in late 2011 after receiving $6 million from Georgia taxpayers and almost $200 million from the Department of Energy and various venture capital companies. Republicans have roundly criticized the use of taxpayer dollars to fund business ventures. We all remember Solyndra.

Ethics reform: Republican and Democratic voters overwhelmingly supported putting lobbyists on a tight leash. Our leadership said they heard the message loud and clear and touted ethics reform as a top priority in 2013. On the last day of the session they did pass a bill restricting lobbyist expenditures to $75 per incident per day. This means a lobbyist can make multiple $75 expenditures on a single official in a single day. There are other loopholes, but perhaps the most discouraging is that lawyers, who comprise the majority of lobbyists, are exempt from any restrictions. This ineffective bill was crafted in a closed committee meeting, closed not only to the general public but also closed to legislators who did not sit on the committee. If our leadership applied the same open meetings law to themselves that applies to local governments, we would trust them more and their votes would be better informed.

What should have changed in 2013

Comprehensive tax reform: Our leadership should have tackled comprehensive tax reform. Three years ago a blue ribbon Special Council on Tax Reform and Fairness was chartered to retool the state’s tax code so Georgia could regain her ability to compete economically. Their proposal centered on reducing the state income tax because of the clear correlation between low or no state income tax and economic performance. Small businesses produce 65 percent of new jobs, most pay income tax at the individual rate, and they are facing onerous new taxes relating to health care. Georgia competes with Tennessee to the north and Florida to the south, neither of which has a state income tax. Keep in mind that our regressive state income tax goes to the top rate of 6 percent when income reaches $10,000. This hits our poorest citizens the hardest. Remember that we were promised an up or down vote on the Special Council’s tax proposal to prevent precisely what is happening — cherry picking without consideration of the whole. We never got that up or down vote.

Comprehensive education reform: Our leadership should have tackled comprehensive education reform. Georgia ranked number 48 of 50 in high school graduation rates for the 2010-2011 school year. About one of four college students requires remedial classes. The centralized state K-12 education model requires a certain amount of funding, and, historically, the state has borne the lion’s share of the cost. However, since 2010 the state funds less than 50 percent but the model has not changed. Local systems are burdened with more costs but are not given more control. Our students and our teachers are being cheated. Once a child gets behind we do not have enough money to close the gap.

At a time when it is critical that more of our young people attend college, we are making it less and less affordable. After accounting for all scholarships, grants, etc., Georgia led the nation in net cost of tuition, growing by 77 percent over the last five years, almost double the next closest state. With student loan rates set to double this summer we are pricing college out of the average Georgian’s reach.  

Comprehensive ethics reform: We did not deserve the smoke and mirrors routine. Spending restrictions on lobbyists without all the loopholes should have been enacted. Two additional changes are also needed to boost the public’s trust in our state leaders. Open meetings laws that apply to local governments should apply to our state government; and a two-year hiatus should be imposed before legislators can be appointed to full-time state positions.

All Georgians agree on the critical need for a robust economic rebound. Nibbling around the edges of the tough topics by making incremental changes, transferring responsibility for tax increases to unelected individuals, ignoring the loud request by voters for true ethics reform and increasing the size and scope of state government ... these actions disappoint. We can do better than this. We must do better than this.  


David Pennington is mayor of Dalton.