January 21, 2020 10:12 AM
This week’s Courier Herald column:
There are two components that make up any budget. When most of us think of our budgets, we tend
to focus on what we spend, as that’s often considered easier to change than our
incomes. When legislators consider a
budget, they’re charged with considering not just what is spent from state
coffers, but how those coffers are filled in the first place.
This truism is lost on many who have internalized that the
job of the Republican party is always to cut revenues. As a case in point, Georgia, led by
Republican majorities, has been increasing spending in its largest budget
category of K-12 education for a decade.
Full funding of QBE and teacher pay raises must be paid for, as do the
salaries of our law enforcement officers, the roads and bridges we drive on,
The role of state Government is not to make “government small
enough to put it in a bathtub and drown it.”
Those that ascribe to this philosophy would also prefer to be in the
minority rather than the majority.
Majority parties have to govern, and there are basic services that the
public expects from the state government – even if this fact is ideologically
inconvenient for some.
It’s necessary to state this in the preamble of this column
to put in clear perspective a bill that passed the legislature last week. Georgia is modernizing the section of its tax
code with respect to collection of sales taxes.
The wording on how Georgia collects sales and use taxes has
not kept up with innovations in the economy.
The result has been that too many sales and services that are subject to
taxation have eluded an effective mechanism to collect. Georgia’s Economist Dr. Jeffrey Dorfman
estimates the loss at $120 Million per year, or $10 Million per month.
Georgia collects roughly one quarter of its budget revenues
from sales and use taxes. Local governments
rely heavily on sales taxes as well. Not
only do a large part of education and other dollars that flow from the state to
counties and cities come from sales taxes, but most counties in Georgia have local
option sales taxes, with many if not most counties taxing 3% on top of the
As our economy has transitioned from one dependent on brick
and mortar stores to one that is increasingly centered on e-commerce, Georgia
has lost the ability to collect taxes on a significant portion of sales
transactions. This is troublesome not
only for current and future spending requirements, but also causes a problem
for those who want to continue to reduce Georgia’s income tax in favor of a
consumption based tax system.
The meat of the bill changes the responsibility of remitting
taxes to the facilitator of the online transaction. This helps both to close the loopholes that
have allowed some to evade collection efforts, but also reduces the number of
entities responsible for forwarding tax dollars due. This makes enforcement and audits easier,
similar to when Georgia changed remittance of motor fuel tax responsibility
from individual gas stations to wholesalers who distribute gas to those
One industry that has received focus is that of “rideshares”. Georgia’s position is that they have always
been obligated to pay sales and use tax.
The two major companies have claimed it does not, and the amount due is
in dispute. While this bill will clarify
that they do have responsibility to charge and remit taxes, separate bills are
expected to address the amount, structure, and likely add some relief to back
But, to be clear, these are not new taxes. Current law states that the consumer – you and
I – are ultimately responsible for remitting taxes that merchants fail to
collect. In practice, virtually none of
us do, and the state has little ability to track what is being lost.
For those that expect education, law enforcement, and other
state services to be funded as economic activity continues to move online, this
is an adjustment to ensure the state collects what is due. Nothing more, and nothing less.