We hear a lot these days during the legislative session ‘season’ about how important it is for us to invest in things that will bring business to our State and will create jobs. Tax credits for new business to locate here, public money for new stadiums and venues, lowering tax rates to spur investments, or any number of other things are discussed and debated as a way to make Georgia an even greater place. Both sides of the political aisle have ideas and solutions that they think are best. Lobbyists lobby and politicians politic and at Sine Die we take a breath and get ready to start it all over again in 8 or 9 months. As Sonny and Cher used to sing; ‘And the beat goes on.’
Unfortunately, one category of investment that usually doesn’t make it to the top of the charts during this time of year is an investment in people; especially poor people.
But investing in people, especially those in need and those living in poverty, is a very good investment indeed. It is good business and it is good for business. Because if we can invest in people, smartly and with specific, measurable, and realistic outcomes and impacts than we can help move people from dependency and need to stability and self-sufficiency. And when that happens people buy things and do things and pay taxes and drive the economy. And when they do that, business benefits.
Some of those investments are obvious and common. Job training, education, transportation, and child care are just some of examples. But some are less obvious as investments in moving people from poverty to self-sufficiency. One of those is the Earned Income Tax Credit. For some people, this is viewed as a give-away. Another ‘hand out from the government to those who don’t contribute. Nothing could be further from the truth.
The Earned Income Tax Credit has been proven, in 26 states and at the federal level, to be an economic driver and motivator for people to work. An EITC, if it is paid in a lump sum at tax time, is used most frequently by those who receive it for large purchases, education, or debt reduction. Things are help local businesses and which help those businesses grow and create jobs. And an EITC, but its very definition, is paid to those who work. So it incentivizes work.
That is why it is so encouraging to see the Georgia House and Senate seriously considering a Georgia EITC this year. This will be a great investment in the people of our state. But the fact that this EITC is being considered along with a change to the tax rates in Georgia to a flat rate is problematic. It is a fixable problem, but one that has to be specifically addressed.
Under the proposed 10% nonrefundable (meaning you can’t get back more than you owe in taxes) EITC proposal combined with a 5.4% flat rate income tax there would be some people at the lower end of the income scale that would actually end up paying more in taxes than they did before. This is especially true of working married couples with no children. Granted there will be a small number of people impacted by this change; but that makes the argument to fix this problem even more valid.
Clearly, it is hard to imagine that this is what those who wrote the EITC and Flat Tax bill desired. They had, I am sure, good intent and truly wanted to support people at lower incomes. That can still be done. Without getting into any discussion of the Flat Tax versus the existing Graduated Tax Rate Georgia now uses, which is another discussion altogether, let’s see if we can all agree that on this particular point we can find a fix that ensures the investment in people made by the creation of a Georgia EITC is a sound investment in all the people who need it.