The current economic recession has not been easy, but if Congress does not act soon it could get a lot worse. In the past, Congress has sped the economic recovery by cutting taxes in ways that encouraged business investment and personal spending. The last time they did this was in 2001 and 2003. Those tax cuts worked, but are scheduled to end this year. The resulting tax hikes will be especially painful for us in Georgia.
The current economic recession has not been easy for most Georgians. As a state Representative, I can tell you it has caused state revenues to drop from $19.1 billion to $15.3 billion over the last two fiscal years. That’s a decline of $3.8 billion or 20 percent in just two years! This dramatic change in state revenue within such a short period of time made it incredibly difficult to pass a balanced state budget, but we still managed to do it without raising taxes. In addition to the budget, we also passed a series of legislative initiatives aimed at boosting Georgia’s economy.
House Bill 1069, called the Angel Investor Bill, offers incentives for private citizens to invest in early-stage, Georgia-based companies. The bill is designed to foster growth in the areas of manufacturing, processing, digital storage, and research and development. This will create quality jobs and spur economic development. Another piece of legislation initiates a five year phase-out of state taxes on passive income for Georgians 65 and older and eliminates the state portion of all property taxes over a 5-year period. These cuts will ease the tax burden on senior citizens and property owners, two of the hardest hit groups by this recession.
Perhaps one of the most ambitious steps taken this year by the Georgia legislature was the passage of House Bill 1405, creating the Special Council on Tax Reform and Fairness for Georgians. This council is charged with conducting a thorough examination of the state’s current revenue structure throughout the remainder of this year and will submit its findings and recommendations for changes to the state’s tax code to the Georgia General Assembly during the 2011 legislative session.
These bills passed by the Georgia House follow time-tested, pro-growth economic theories. The basic idea is by easing Georgians’ tax burdens and promoting business investment, we encourage spending in the private sector and business growth, which boosts our economy and increases employment.
The Republican Congress successfully used those same theories when they passed the 2001 and 2003 federal tax cuts. Those federal tax cuts included reduced individual income tax rates, a doubling of the child tax credit to $1,000, expanded incentives for retirement saving, lowered dividend and capital gains tax rates, and improved saving and investment incentives. This tax relief worked. After the 2003 tax cuts were signed into law, there was an almost immediate jump in the national gross domestic product. Payroll employment also rose by 311,000 jobs.
When looking at that astonishing success, it seems like common sense that our federal government would learn from that lesson and once again enact pro-growth tax cuts. However, just the opposite is happening. The 2001 and 2003 federal tax cuts are scheduled to expire at the end of this year. Unless Congress acts quickly, we will see personal income tax hikes, savings and investment tax hikes, and a drastic reduction in small business expensing. These taxes will go into affect on January 1, 2011. The results will curb business growth, counteract the positive steps taken by our General Assembly to boost Georgia’s economy, and cripple any hope we have for speedy economic recovery.
While these tax hikes are scary, they are not inevitable. It is not too late for Congress to act. They can still extend the 2001 and 2003 federal tax cuts, and we need to encourage them to do so. I ask all of you to please join me in writing, emailing, faxing, and calling our elected officials in Congress. It’s easy, just call the Capitol Switchboard at (202) 224-3121 and ask for your Congressman. Then let your U.S. Representative and Senators know where you stand. Let them know you support pro-growth tax cuts. Let them know you expect them to extend the 2001 and 2003 federal tax cuts.
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Representative Tony Sellier represents the citizens of District 136, which includes portions of Bibb, Crawford, Houston, Lamar, Monroe, Peach, and Upson counties. He was elected into the House of Representatives in 2006, and is currently the Secretary of the Defense & Veteran Affairs Committee. He also serves on the Agriculture and Consumer Affairs, Education, and Health & Human Services committees.