ATLANTA — A panel created by the state legislature to revamp Georgia’s tax code on Friday recommended reinstating the 4 percent state sales tax on groceries.
The Special Council on Tax Reform and Fairness for Georgians also said the state should lower its personal income tax from 6 percent to 4 percent by 2014 and trim the corporate tax as well. The state’s 37 cent tax on a pack of cigarettes would rise to 68 cents, under the panel’s plan. The council also said that Georgia should eliminate a pair of weeklong sales tax holidays.
Taken as a whole, the recommendations unveiled on Friday will not bring in any more money for the state once they were fully implemented, according to council chairman A.D. Frazier.
Frazier said lowering the income tax would make Georgia more appealing to out-of-state businesses looking to relocate. And he said the movement to a structure based more on consumption-based taxes would be fairer and allow individuals to better control how much they pay to the government.
Consumption taxes — like sales taxes — charge residents based on what they spend rather than what they earn.
“Georgia is at a crossroads,” Frazier said Friday. “If this isn’t the time to do tax reform I don’t know what is.”
But the proposal to hike taxes will be a tough sell in Georgia’s Republican-led Legislature. The proposal received a cool reception from Gov.-elect Nathan Deal, who said during the campaign he opposed placing the state sales tax back on food items.
Deal spokesman Brian Robinson said the Republican had not yet read the 34-page report but noted that he’d run a plan to cut taxes.
“He’s committed to assuring that we don’t raise taxes on Georgia’s families and job creators,” Robinson said.
House Speaker David Ralston and Lt. Gov. Casey Cagle also remained noncommittal on Friday.
Democrats quickly assailed the proposal.
“The recommendations would impose serious challenges to families in Georgia, while reducing tax rates for corporations,” House Democratic Leader Stacey Abrams said.
Advocates also quickly lined up against hiking the tax on groceries, which they said would unfairly hurt the poor and residents on fixed incomes.
Kathy Floyd, advocacy director for AARP Georgia, said retirees would see little benefit from the cut in income taxes since Social Security benefits aren’t taxed but would still be hit with higher bills at the grocery store.
“We have a big concern,” Floyd said.
Frazier said the plan cannot work without the grocery tax, which he said creates the most stable form of sales tax revenue. Estimates show it would bring in between $472 million and $649 million in additional tax revenue.
Mandy Rafool, a fiscal analyst at the National Conference of State Legislatures, said she was unaware of any other states considering plans to boost a grocery taxes.
“We talk about there being no sacred cows this year but groceries may come awfully close,” Rafoon said.
The tax panel — composed of business leaders and economists — was created by state legislators last year to study Georgia’s tax code, which Republican leaders said needed a facelift. They’ve been working for the last six months and delivered their recommendations to Ralston and Cagle on Friday, just before the Monday start of the legislative session.
The report will be handed to the Special Joint Committee on Georgia Revenue Structure, made up of House and Senate leaders, which is expected to hold hearings and could turn the recommendations into legislation.
Among the council’s other recommendations:
• Keep agricultural tax exemptions
• Add a sales tax exemption for energy used in manufacturing
• Reduce the insurance premium tax
• Apply a sales tax to so-called “casual sales” in which an individual sells a car or boat directly to a buyer.
• Add a sales tax to a number of services not currently taxed, including dry cleaning, automobile body work, hair cuts and veterinarian visits.