A proposal currently being reviewed by the Georgia General Assembly to tax services like haircuts, car repair, shoe repair, auto detailing, dry cleaning, veterinary care, tire installation and a host of others, is part of a sprawling tax reform package recommended by the 11-member Special Council on Tax Reform and Fairness.
That particular aspect of the package is causing anxiety among Georgia’s small businesses which are represented, theoretically at least, on the council by the National Federation of Independent Business (NFIB).
According to the legislation that established the council, the chair of the Georgia chapter of the NFIB serves on the council, which puts the small business advocacy group in an interesting position.
Kyle Jackson, president of the state chapter, says his group’s representation on the council will have no bearing on whether the NFIB supports the council’s recommendations.
“Our membership at large determines what we will do,” says Jackson.
They’ll get a chance to do that over the next few weeks. He says the NFIB is preparing a ballot to send to its approximately 8,000 Georgia members that will enable them to vote on whether the NFIB lobbies for or against the tax on services. He suspects many will see the new tax as a trade for a proposed 2 percent cut in income taxes, from 6 percent to 4 percent, that will be phased in over three years. The income tax cut is also included in the council’s tax reform package.
Jackson says until he gets those ballots back, he can’t say which way the NFIB will go.
“I NOTICED ATTORNEYS WEREN’T ON THE LIST”
Richard Campbell, who runs a small, freelance video production company in unincorporated DeKalb County, thinks that looks fishy along with just about everything else related to the proposal.
“That’s kind of like Muammar Gaddafi saying ‘We’re going to have a fair and free election, but I’m going to be standing here next to the voting booth,’” says Campbell, who adds that he is not a member of the NFIB, “Nor would I want to be now that I know they were part of the idea for taxing services provided by small businesses that are not likely to fight back.”
He points out that the proposal’s roll back in income taxes doesn’t come close to balancing the immediate impact of the tax on services that may be as much as 7 percent: 4 percent applied by the state plus 3 percent that counties are allowed to add, or as much as 4 percent added within the City of Atlanta.
“That income tax savings is nothing compared to the tax on services and the money that I will have to spend on additional bookkeeping so I can show the state that I’m paying the tax,” he says.
His clients are large television and cable networks and when they engage him for a project, that project has a set budget. He says there is only so much they can spend and that amount isn’t likely to increase just because Georgia wants more revenue.
“Which means that I will end up eating the cost of that tax,” he says.
Besides being a small business operator, Campbell is also active in local pet rescue organizations and the tax on veterinary services is worrying him. The metro area has a notorious problem with pets not being cared for and ending up in shelters which are struggling to provide veterinary services as it is, he says.
“I can barely get out of the vet already without having to pay a couple of hundred bucks,” he says. “Maybe an additional 7 percent out of your pocket doesn’t sound like much, but think about what they are charging it on: Haircuts, dry cleaning, tires, the vet, these are all services provided by businesses that don’t make a lot of money but that all of us use. Now we’ll be spending more money but it won’t be going to those businesses. It will be going to [the government].”
Campbell has written to State Rep. Simone Bell (D-Atlanta) protesting the choice of services taxed. He asked her to suggest that if the Generally Assembly passes the tax, it doesn’t play favorites. The council’s recommendation names photographers as a group to be taxed and Campbell believes that will apply to him.
“I noticed attorneys weren’t on the list,” he says. “Don’t they provide personal services?”
ATLANTA WOULD BE HIT HARDEST
Service-oriented businesses in the City of Atlanta would take the biggest hit of all under the proposal—a new tax of 8 percent total, 4 percent paid to the state and 4 percent paid to the city.
Josh Guerrieri, who operates FitWit, a personal training company that currently employs five people fulltime is on pins and needles wondering if the legislation’s inclusion of “fitness memberships” means him. If it does, then his plans to employ a few more people in the coming year are likely stymied.
“We had plans to grow, but now, I don’t know,” he says, explaining that even without expansion, the 8 percent bite into his bottom line is prohibitive. “I don’t know if we could take the hit and still be profitable. I’ll be honest, it would really hurt.” SR
To see the list of personal services the council proposes to tax, click on this link to an AJC story about the proposal and then scroll to the end.