TAX ON GROCERIES A LOSING PROPOSITION FOR CITIZENS AND LEGISLATORS

The Special Council on Tax Reform and Fairness for Georgians, 11 people who likely have an average individual income of well over $100,000 a year, has advised the Georgia legislature that it can dig the state government out of its budget morass by making citizens pay more for their groceries.

They say the state should reinstate the 4 percent tax on groceries it abolished in 1996 and balance it by cutting income taxes by about 2 percent. A decrease in income taxes would be welcome, and for a state government struggling to cover its budget reinstating the grocery tax is tempting—until Georgia’s employment and income facts are considered. And, until one considers that the grocery tax would kick in first, while the decrease in income tax would be staggered in over several years.

The tax council is chaired by A.D. Frazier, whom Atlantans will remember as chief operating officer for the Atlanta Committee on the Olympic Games (ACOG)—an event that was a boondoggle for developers and a multi-million-dollar burden for taxpayers (as explained quite thoroughly by Georgia Tech professor Larry Keating in his book “Atlanta: Race, class and urban expansion”).

In the tax council’s recommendations to the state legislature, released earlier this month, Frazier wrote to his colleagues that he “heard from, and spoke to, over 750 Georgia citizens” including “farmers, poultry producers, mayors, city council members, corporate tax directors, graduate students, carpet manufacturers, real estate developers, property owners and many, many more…” in coming up with the council’s recommendations

According to U.S. Census Bureau figures collected in 2009, there are nearly 10 million  Georgians, so the group Frazier cites is merely a focus group. Furthermore, most of us aren’t represented by the focus group. Poultry producers, mayors, city council members, corporate tax directors and real estate developers make up only a minute portion of the state’s population and they all have a vested interest in hiking the taxes paid at the grocery store. The farmers are subsidized off taxes, as are the politicians, the corporations, the students, the carpet manufacturers, and—particularly in the city of Atlanta—the real estate developers. But most of us aren’t.

Yes, the state budget needs to be balanced, but we don’t need to reinstate the grocery tax to do that. Georgia has some odd taxes and tax incentives that it can cut instead.

WHAT ELSE CAN WE DO?

So where will we find more money? Although some legislators are huge fans of stars coming to town to make movies, Georgia needs to rethink its handouts to Hollywood. According to national think tank The Tax Foundation, “from 2004 to 2006 Georgia gave up $265 million for incentives programs, even though the Georgia Department of Audits and Accounts has gone on the record, saying they have no way to know if that money helped Georgia’s economy. As a prime example of tempting but unjustified tax incentives, take movie production incentives. There’s the allure of Hollywood stars visiting Georgia, and the thrill of seeing in-state sights on the big screen or on TV series. Most states have fallen for this con, and Georgia is no exception. The 2008 Georgia Entertainment Industry Investment Act dipped into both the corporate tax base and the sales tax base, offering tax credits up to 20 percent and sales and use tax exemption.” The Tax Foundation continues: “While luring movie companies into Georgia might be politically popular, there is no evidence it does anything long-term for the state’s economy other than depriving it of revenue and giving the legislature and the Department of Revenue a chance to pick favorites. Georgia should get out of the business of pleasing certain industries with bribes paid out of the taxpayers’ pockets…. If tax incentives such as the film tax credit and others like it can be repealed, it will be feasible to lower the state’s corporate income tax rate. That is usually a good way to grow the private sector.”

The Tax Foundation does recommend reinstating the grocery tax, but doesn’t take into account the number of working families in Georgia who are already struggling to pay for their groceries as well as the number on fixed incomes: the unemployed and the retired.

According to the U.S. Census Bureau, nearly 60 percent of Georgia households earn less than $60,000 per year. Keep in mind, these are not crap jobs—the average salary of an Atlanta Police officer is about $41,000, and most teachers earn less than $60,000. Those wages are supporting families: About half of Georgia’s families include children under the age of 18. Of Georgia families headed by married parents, well over half require both parents to work to support the household which typically includes at least two children.

Georgia is a hard working state where people don’t want to go on the dole. According to the census, only about 10 percent of Georgians receive food stamps. The rest of us pay for our groceries. We all have to eat; even the almost half million Georgians who, according to the Georgia Department of Labor (DOL), are currently unemployed. Of those, fewer than 200,000 received unemployment benefits in the second week of January. The rest, explains Sam Hall, spokesman for the DOL, have likely exhausted their employment benefits. They won’t be getting a raise anytime soon, so if the price of groceries goes up, what do you think they will do?

Conservative financial advisor Dave Ramsey says people who suddenly find themselves unemployed should make sure they cover the basics—food, heating, electricity and water—and, if necessary, let the creditors wait. Georgia’s jobless are barely scraping by as it is; hike the tax on food and we’ll see more credit card bills not getting paid. (I know what you’re thinking: Earlier this blog said “more foreclosures and repossessions,” which theoretically speaking could happen, given the snowball effect of added expenses. Put another way, if your grocery bill is $1,000 per month, the new tax will only add $40 onto it. What’s the big deal? Most families are barely scraping by. That $40 is currently paying for something else. Whatever it is–cable bill, gym membership, family night at the bowling alley–it will now disappear into the coffers of government where there is a better than average chance that the people you elected will spend it on stuff you wouldn’t.)

Then there are the retired or disabled. Some 860,000 Georgians rely on social security—they can’t ask for bonus to help cover the cost of groceries.

The council says putting the tax back on food will help small businesses. Not the small businesses I know. Restaurants, stores, landscapers, roofers, mechanics, pet-sitters, nurseries, cleaners, carpenters, contractors, and others all rely on people having disposable income. That’s just about disappeared. Raise the cost of groceries and more people will be staying home to eat, terminating their lawn care, putting off, yet again, patching the roof, not taking a vacation, using the lint brush more and the dry cleaners less, foregoing the tune-up, delaying building that deck or fixing the one they’ve got.

Fortunately, the recommendation to raise the cost of groceries deeply affects the three age groups most likely to vote in Georgia, according to the secretary of state’s office. There are more active voters over the age of 65 than is true for any other age group. The second most-likely-to-vote group are those between the ages of 45 and 49, people who likely have kids in high school or college; people who know how quickly the fridge gets emptied and what it’s like to try to finance a college student in a separate household. The third most-likely-to-vote group is made up of 18 to 24 year-olds, and though they might not have mortgages yet, they certainly know how quickly their small incomes are depleted by a trip to the grocery store and how much mom and dad are struggling.

Regardless of party, Georgia’s legislators had better think twice before asking a cash-strapped population to pony up more in the checkout line, unless they’re okay with being voted out. SR

2 thoughts on “TAX ON GROCERIES A LOSING PROPOSITION FOR CITIZENS AND LEGISLATORS

  1. I agree with you on state sales tax on groceries, given the present 6% Georgia income tax top rate. Only 15 states still have sales tax on groceries, and that number is likely to increase.
    What are your thoughts on Georgia adopting a flat tax and eliminating the income tax?

  2. Unfortunately you are very mistaken on your statements regarding the purpose behind the film industry’s tax incentive in GA. Its not so someone might happen to see a celebrity at their local Waffle House or even so someone might see a local landmark. The film industry brought $1.5 billion dollars to GA since mid 2008. As a Georgia resident that is employed by the film industry, I have seen just how many jobs one movie can create, let alone the multiple movies and TV shows that have come to Georgia since the tax incentive was created. A lot of States such as Arizona, Iowa, and Kansas put out ridiculously large incentives since, well lets be honest, why would someone want to go to these areas to film. There is no infrastructure such as equipment houses, studios, etc. that make it easier to create a film. By going so far overboard to try to attract the film industry to their state, they lost money.
    Yes, trying to milk more money out of the population that is already financially struggling is an awful way to make up for shoddy budgeting on behalf of our state officials, but getting rid of an incentive that brings jobs to a state with 10.3% unemployment would be a horrible decision.

Comments are closed.