Great leaders of free and prosperous societies get this economic concept: when government cuts taxes it stimulates the economy and brings more revenue into public coffers.
Consider some honored statesmen who turned their nation’s economies around with such creative tax policy. John F. Kennedy, Margaret Thatcher, Ronald Reagan just to name a few.
They each enacted significant tax cuts which not only stemmed recessions but brought more revenue to their governments.
When taxes are cut, consumers have extra cash and they spend it. They buy a new pair of jeans, go out to dinner, take a vacation or purchase the latest flat-screen television. That creates more jobs and generates more tax revenue for federal, state and local tax coffers.
The best predictor of future behavior is past behavior, so we know that’s exactly what will happen when Georgia families don’t have to pay “the birthday tax” on their vehicles annually. They will spend that new-found money.
The Georgia House has adopted legislation to allow voters to abolish this offensive ad valorem tax on personal vehicles. The Senate should quickly follow.
Any worry-worts concerned about the projected $679 million impact to the state budget when the tax is fully implemented in 2010 only need to look at the history of tax cuts in this nation to get comfortable about what tax cuts can do for government revenues.
• During President John F. Kennedy’s presidency, significant income tax cuts were enacted, resulting in a 62 percent increase in revenue to the U.S. Treasury from 1961 to 1965.
• Federal revenues increased $500 billion after Ronald Reagan cut marginal tax rates during his presidency. Those cuts helped stop the horrible inflation that was strangling our nation during the Carter years.
In a 1962 speech to the Economic Club of New York, President Kennedy said, “The soundest way to raise revenues in the long run is to cut taxes. This is the most important step we could take to prevent a recession.”
Former British Prime Minister Margaret Thatcher had the same experience. When she took control of her country in 1979, the nation was almost bankrupt. Her tax cuts generated new revenue and balanced the country's budget.
After Sept. 11, 2001 when the nation was anxious, the economy slipped into a recession and consumer confidence was down. But the President passed two significant tax cuts. Those cuts caused our economy to quickly rebound and bring in new revenues to the federal government.
According to the Tax Foundation in Washington, D.C., New York State, meanwhile, responded to 9/11 by raising taxes which in turn hurt that state’s economy. Only when those taxes expired did New York begin to recover.
If Georgia voters approve the constitutional amendment this November to remove “the birthday tax” on vehicles, it will be phased out over two years. The revenue will come from growth in our state’s tax receipts. Even with some naysayers concerned about recent revenue projections, state economists predict continued healthy growth next year with state revenues to increase 4.5 percent while maintaining our reserve funds. Other states would love to be in that financial condition.
With an estimated $3.6 billion federal economic stimulus package also coming to Georgia this year, we will have new money spent in our state that will aid our economy and, in turn, bring $240 million additional money to state tax receipts.
If we are successful with eliminating “the birthday tax,” it would be one of the most progressive tax cuts ever adopted in Georgia. 93 percent of Georgians own vehicles. Some may not own a home, but virtually no one is without a vehicle.
When government has extra revenues and record reserves, it has taxed its people too much. Georgians want to keep that $200 or $300 per vehicle to buy a birthday present, take their families on a vacation or even throw a party. The birthday tax cut would not only be a present we can give all Georgians, but it would be a gift of new revenues to the state's economy and its budget.
Mark Burkhalter is a Republican state representative from Johns Creek and is Speaker Pro Tempore of the Georgia House.
What We Think
Cutting taxes will stimulate Georgia’s economy
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