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Tax rewrite plan keeps some exemptions

Speaker reveals his proposal

POSTED: November 21, 2007 5:01 a.m.

 

ATLANTA -- If there are early winners in House Speaker Glenn Richardson's tax plan, the medical and farm industries are near the top of the list. Both are set to keep huge sales tax exemptions worth hundreds of millions of dollars they say are vital to their survival.

Both also poured hefty contributions into the political action committee, MMV Alliance Fund, with close ties to the speaker. The fund is paying Arthur Laffer, the economist crafting the plan.

Tax reform is expected to be at the top of the agenda in the coming legislative session. And Richardson's radical plan to do away with most property taxes in the state and instead expand the sales tax on goods and services will be at the center of the debate.

The question of what will and will not be taxed under Richardson's sweeping proposal has touched off feverish lobbying at the state Capitol.

A spokeswoman for Richardson denied that the contributions had anything to do with the tax plan's outcome.

But the cash changing hands reflects some of what's at stake.

The medical industry funneled $119,300 into MMV fund. That's slightly more than one-quarter of the $452,162 committee has raised altogether. The contributors range from individual doctors and surgical centers to heavy-hitters in the pharmaceutical and hospital arena.

To the relief of the health care community, the portion of Richardson's plan unveiled on Monday keeps in place exemptions on the sale of medical equipment and the sale of goods to hospitals and nursing homes. Together the exemptions are worth more than $317 million.

The news wasn't all good. They could feel a pinch from losing an exemption on the sale of prescription drugs and medical devices that's expected to shovel more than $264 million into state coffers.

It's still unclear what services Richardson's plan will tax. But he has expressed concerns about adding to the rising costs of healthcare by slapping tax on patients they visit their doctors. Health care is likely to face a very low tax, if any at all, under the plan, he said at a speech before county commissioners in early October.

Richardson spokeswoman Clelia Davis said the speaker had always been planning on treating healthcare differently and he was not motivated by the flow of donations.

"Georgians expect low-cost health care," she said. "We're not trying to drive healthcare costs up."

Richardson was also kind to Georgia's farmers.

The industry will keep sales tax exemptions worth more than $52 million on the sale of raw materials and machinery used in farming and ranching. The industry ponied up $8,250 for the MMV fund, much of it from the state's poultry industry.

Davis said the farm exemptions were selected because they made sense.

And farmers did lose some smaller exemptions on things like the sale of certain diesel fuels and equipment used in harvesting lumber.

John Huffmaster, legislative director for the Georgia Farm Bureau, said the group was still studying the plan before taking any position.

"We are interested in the idea of property tax reform," Huffmaster said.

Utilities were not among the large donors to the Richardson PAC and they were a big losers in the speaker's plan. Among the largest property owners in the state, they would continue to pay taxes worth $360 million on their land.

The biggest single exemption in Richardson's plan is on the sale of raw materials to manufacturers worth a whopping $3.2 billion.

The plan was drawn up by Laffer, the economist responsible for Reaganomics. He gained fame for creating a system — dubbed the Laffer Curve — that he uses to support a supply-side economics model that suggests that tax cuts can sometimes pay for themselves.

MMV paid Laffer's Nashville, Tenn. firm $65,0000 earlier this year.

MMV's treasurer is Richardson's former chief of staff, Jay Walker.

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The GREAT Plan for Georgia: www.thegreatplanforgeorgia.com

 

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