Wanna save the budget AND cut taxes for most Georgians? Just do this: (credit, how much)

[toll_booth]

Change the income tax brackets.

Consider that, though the budget hole has apparently been closed for 2010, Georgia is expected to suffer an $823 million deficit next year and a $1.94 billion deficit in 2012. There are only three ways to close this hole: cut spending, raise taxes, or a combination of the two. There is no other way.

Let's look at a few numbers. Georgia collected $9,788,518,000 in income taxes in 2008 (granted, that number will almost certainly go down for 2009), which was more than half of this state's tax revenue. That breaks down to $1,877 in total taxes per capita.

Now check out this chart:



How much exactly is that upper 5% making? Let's see:

http://upload.wikimedia.org/wikipedia/en/a/a7/United_States_Income_Distribution_1967-2003.svg (broken link)

Basically, we're looking right around the $160,000 mark.

Let's say that a couple things happen. Let's say that Georgia's income distribution is identical to this US distribution, and that it pretty much carries over to the year 2010 (assumptions that skew the data against the upper brackets, because of the continued disparity between upper and lower income brackets). Let's also say that everybody in this upper 5th percentile makes $200,000, to keep everything straight. Now according to the latest figures, there were 5,559,982 people employed in Georgia in 2008. Five percent of that is 278,000, which gives them a combined earning power of $55.6 billion. So each 1% increase in income taxes for that bracket would net the state $556 million, not including other factors at play. The current tax bracket level is pretty much 6% for all but the poorest Georgians; at $200,000, it comes to an effective rate of 5.91%. Multiplying all those numbers together, we get an estimated income tax revenue of $6.57 billion. That is about 2/3 of the total revenue. No other factors in play, which would reduce the tax revenues, a 3% effective tax hike on $200,000-earning Georgians would increase that revenue to $9.90 billion--more than all 2008 income tax revenue combined. Which means that even a zero percent bracket for all lower levels would, at worst and no other factors considered, only push us back to break-even.

So let's shift the tax brackets around. Let's take the current brackets of:

<$750: 1%
<$2250: 2%
<$3750: 3%
<$5250: 4%
<$7000: 5%
above that: 6%

to:

<$20,000: 0% (that's right, zero!)
<$70,000: 3%
<$130,000: 10%
above that: 18%

Before you go and cry "Soshalism," look at this strictly in a dollars-and-cents point-of-view. Deductions aside, everyone who makes about $130,000 or less would get a tax cut--the overwhelming majority of us. And adding an additional 12% to the top bracket would still make the rich's effective federal + state tax rate well short of the 70% bracket in effect under President Nixon, or especially the 91% bracket under President Eisenhower. Besides, Georgia already has some of the lowest taxes in the nation, so pulling back even is very unlikely to take us on a near worst-to-first track.

In short, we raise more taxes, reduce the state deficit, and reduce taxes for most Georgians. Everybody but the richest wins.

[mccarley]

This sounds like the last presidential race promise.

[toll_booth]

Originally Posted by mccarley

This sounds like the last presidential race promise.

So what do you think about the proposals? Assuming that you make less than $150,000 per year (which is statistically probable but not guaranteed), would you like a tax cut?

[mccarley]

I don't believe in taking from one group and giving to another. Everyone should pay. The earned income tax credit takes from one group and gives to another.

[rcsteiner]

Originally Posted by toll_booth

...Besides, Georgia already has some of the lowest taxes in the nation, so pulling back even is very unlikely to take us on a near worst-to-first track.

Actually, Georgia is barely in the top (highest) third of states in terms of tax burden, at last according to this web site. It ranks 16th:

The Tax Foundation - Tax Research Areas > Georgia

"Estimated at 9.9% of income, Georgia's state/local tax burden percentage ranks 16th highest, slightly above the national average of 9.7%. Georgia taxpayers pay $3,735 per capita in state and local taxes. Since 1977, Georgia has risen 20 places in the rankings."

Your ideas are interesting. I have to think more before commenting, though.

[toll_booth]

Originally Posted by mccarley

I don't believe in taking from one group and giving to another. Everyone should pay. The earned income tax credit takes from one group and gives to another.

Would you like a tax cut, yes or no?

Originally Posted by rcsteiner

Actually, Georgia is barely in the top (highest) third of states in terms of tax burden, at last according to this web site. It ranks 16th:

The Tax Foundation - Tax Research Areas > Georgia

"Estimated at 9.9% of income, Georgia's state/local tax burden percentage ranks 16th highest, slightly above the national average of 9.7%. Georgia taxpayers pay $3,735 per capita in state and local taxes. Since 1977, Georgia has risen 20 places in the rankings."

Your ideas are interesting. I have to think more before commenting, though.

Interesting--did not know we were that high. I had always believed the rhetoric that we have some of the lowest taxes in the nation. Guess not. And all the more reason to implement the proposed plan, IMO, possibly with the next-to-highest bracket's rate reduced a couple percentage points.

[BobKovacs]

I'm in the upper 5th, and would be OK with a slight tax increase to close the gap- but why does everyone else get a tax cut? How about if we just ratchet everyone up a little, instead of making the high-earners pay considerably more than they currently do? Why should my taxes triple while yours get cut in half?

Based on your $1.94 billion expected deficit, that's a deficit of $372 per capita- I'll throw in the $1,500 to cover my family of four, so lets get everyone else to cover their $372 and we'll be just fine.

[mccarley]

Originally Posted by BobKovacs

I'm in the upper 5th, and would be OK with a slight tax increase to close the gap- but why does everyone else get a tax cut? How about if we just ratchet everyone up a little, instead of making the high-earners pay considerably more than they currently do? Why should my taxes triple while yours get cut in half?

Based on your $1.94 billion expected deficit, that's a deficit of $372 per capita- I'll throw in the $1,500 to cover my family of four, so lets get everyone else to cover their $372 and we'll be just fine.

Thats what I say. Let everyone pay their fair share to live in this great country/state.

[Ollie1946]

The upper quintile runs the show. I would not hold my breath on this idea.

[evilnewbie]

Lets see.. you advocate stealing from others so you will be better off... yeah... you are a great person... nahh...