(The Center Square) – Every state that implemented an individual income tax since 1960 had both its gross domestic product and total tax revenue decline, Dr. Arthur B. Laffer of The Laffer Center told Georgia senators Monday.
Of the 11 states that introduced an income tax in that time frame, not one succeeded in boosting their total revenue. Those states were West Virginia, Indiana, Michigan, Nebraska, Illinois, Maine, Pennsylvania, Rhode Island, Ohio, New Jersey and Connecticut.
“What I’m saying here is when a state introduces an income tax, it collapses before your very eyes,” said Laffer. Adding, “If they were to get rid of their income tax, they could return to the state they were prior to the income tax which would be an enormous improvement.”
A primary concern over eliminating the state income tax is replacing the revenue, according to Sen. Nan Orrock. She said 56% of the annual state budget is income tax revenue.
“You don’t want to balance the state budget by unbalancing the citizens of the state,” Laffer said.
One way to successfully get rid of the income tax without the state budget taking a hit, according to Laffer, is to eliminate sales tax credits.
It’s possible, Laffer said, to do away with the state income tax and potentially even lower the sales tax if the sales tax credits were scrapped.
That point spoke directly to another concern brought up by Orrock who pointed out some states that eliminated income taxes have higher sales taxes.
“Your sales tax exemptions cost you in revenues more than the income tax collects,” said Laffer.
Georgia ranks among the top 20 most expensive states for single adults, Patrice Onwuka, director of the Independent Women’s Center for Economic Opportunity, told the committee. With prices rising more than 20% over the last four years due to inflation, 52% of Georgians are living paycheck to paycheck, Onwuka said.
“Eliminating the state income tax would be an immediate boost in take home pay that would give women the ability to purchase the essentials they need and increase their discretionary spending,” said Onwuka.
The Senate Special Committee on Eliminating Georgia’s Income Tax has been tasked by the lieutenant governor to examine ways to eliminate the state income tax.
Florida and Tennessee have done away with the state income tax. Other states are also looking at similar measures to either reduce or eliminate income taxes, according to Sen. Blake Tillery who chairs the committee.
“That’s the world we’re operating in from a competitive issue as a state with surrounding states tackling this topic,” Tillery said.
