July 29, 2012

Mayor David Pennington: TSPLOST, plan B

— It’s important that you understand the TSPLOST (transportation Special Purpose Local Option Sales Tax) is the wrong tax, at the wrong time, chasing the wrong solution.

The solution that is on the ballot is attempting to solve our traffic problems, but the solution we need is the one that helps solve our economic problems. The problem is not that Georgians are stuck on highways for hours and hours but that Georgians have lost jobs and income.

So there is a Plan B once the statewide TSPLOST is defeated. This plan will not only solve our road and infrastructure problem but lays out the bold steps Georgia requires to compete in the 21st century economy by embracing comprehensive tax and ethics reform. Tax reform will incent the job creation required for economic prosperity. Economic prosperity is what pays for a 21st century infrastructure. But these reforms will be challenging, and trust in our state leaders is necessary.

“The State of the State” tells the tale. Georgia ranks 49th in per capita income growth over the last decade, and, when adjusted for inflation, earnings per worker declined. At the end of June, Georgia suffered from the seventh highest unemployment rate in the nation. We rank third in foreclosure rates for the first half of 2012, and first in bank failures with 80 over the last three years. Georgia also ranks first in corruption with a grade of “F” from the State Integrity Investigation. These statistics paint a disheartening picture of a stagnant economy in need of breakthrough solutions.

Georgia has the 11th highest personal income tax rate in the country, and a significant reduction in this tax rate is the crux of needed tax reform. This is a game changer because this tax hits small businesses the hardest, and they are the backbone of America. In the last 15 years small businesses produced 64 percent of the net new jobs in America, and 97 percent of Georgia’s businesses are classified as small. Since almost all small businesses are organized as “pass through” entities, their net income goes to the owners who pay personal income tax on that income — not corporate tax. According to the American Legislative Exchange Council, states without income taxes had faster output growth than the states with the highest income taxes — and this holds true for the last 40 years.

Attracting large companies like Caterpillar that will employ over 1,000 people is important, but it is the icing on the cake. Small businesses are the cake. We need creative entrepreneurs to follow their dreams, start new businesses and expand existing ones. Georgia’s tax code must foster this activity if we are to enjoy strong economic growth and raise the standard of living for all Georgians.

Additional tax reforms are also needed and, while reasonable people can differ on the details, the blue ribbon panel charged in 2010 with evaluating Georgia’s revenue structure and recommending changes determined that “... the existing tax structure contains duplication, lacks clarity, imposes significant compliance costs on taxpayers, and hasn’t kept pace with the modern economy.” This panel recommended significant changes to our tax code. Our state leaders who had promised an up or down vote on this package failed to honor that promise.

From lack of enforcement of disclosure laws to state workers accepting vendor gifts to executives of regulated entities providing the majority of campaign money for regulators running for re-election, our state leaders fail the ethics test. The bold steps needed to turn around Georgia’s economy require trust in those leading the way. Ethics reform must accompany tax reform.  

Let’s not drag our state further down by imposing the largest tax increase in Georgia’s history. Let’s defeat the TSPLOST and begin the process of effecting positive economic change. Let’s move on to Plan B ... the path to a prosperous future.


David Pennington is the mayor of Dalton.