Friday, October 19, 2018
NOTES FROM THE SENATE, OCTOBER 19, 2018
SOME HISTORY OF THE ELEMENTS OF GEORGIA'S REVENUES
Every month I report on the numbers from the Department of Revenues' report and discuss how the state is doing. It hasn't always been this strong or positive for the state. And there are sections of the Revenue Report that have a history. This seemed like a good time to both compare where the state is to other Southern states but also to look more deeply at the areas of the revenue report. First the good news.
GEORGIA AT OR NEAR TOP OF SOUTHERN STATES
Whether you look at the first three months of the fiscal year or look back 12 months, Georgia compares very well in either ranking. CAUTION, each month there is a state that has a temporary increase for any number of reasons. Also, one reason we look at both the Fiscal Year numbers and the 12-month trailing average is because this smooths out the bumps, dips and fluctuations.
FIRST QUARTER REVENUE RESULTS
July/August/September revenues compared to same period a year ago. (For states we have info)
West Virginia 17.9%
12 MONTH AVERAGE SMOOTHS OUT THE YEAR, IDENTIFIES TRENDS
We take the current month revenue growth and go back 11 more months. This changes each month, or "trails", identifying the actual growth rate trend, whether it is moving up or down.
12 Month Trailing Average through September (for states we have info on)
Louisiana 7.0% (Raised Taxes)
Texas 9.1% (Oil Revenues Back up)
West Virginia 5.1%
Georgia has remained consistent and does not bounce around like some states. The oil producing states particularly suffer when world oil prices are depressed and have boom times when prices reach new highs.
GEORGIA AHEAD OF BUDGET, REVENUES AHEAD OF LAST YEAR
As reported previously, Georgia's conservative budgeting and conservative revenue estimate produce good things for the state. First, if the economy slips during the year, the state can absorb a decline, as pointed out in last week's column on stress testing of states.
Also, a conservative revenue estimate builds in a cushion that helps to continue to build our rainy-day fund, the RSR. Georgia's reserve is expected to be about $2.7 billion after all lapsed funds in June are accounted for.
So far in FY 2019, revenues are ahead of FY 2018 by $329.9 million. Compared to the budget the state is operating under so far, revenues exceed budget requirements by some $189.6 million after three months.
SOME HISTORY - HB 170, THE FUEL TAX
Fuel taxes have a long history in the state, dating from the original one cent Excise Tax in 1921 to seven cents in 1950. The rate increased to 7.5 cents in 1971. In 1979, a second motor fuel tax was added when a 3% sales tax was placed on fuel.
In 1989, the state sales tax was increased to 4% leaving the 7.5 cent excise tax on fuel and the 3% sales tax added to a 1% general sales tax including fuel.
Changes in the collection of the taxes on fuel occurred through the years, but the largest change happened with the passage of HB 170 in 2015. This legislation converted all Motor Fuel Tax revenue to an excise tax, raised it slightly and applied the Motor Fuel portion of sales taxes to be dedicated to transportation, removing the revenue from the General Budget. The Legislature added an Impact fee and a $5.00 per night hotel/motel fee with all funds going to transportation. The legislation also froze the local portion sales tax on fuel to 1 per cent of the retail price of motor fuel, capped at the $3.00 per gallon level.
WHAT ABOUT THOSE TITLE TAX FEES?
HB 386, passed in 2012 and effective in 2013, required all ad valorem taxes on vehicles (requiring a title) changed from a sales tax at purchase and Ad Valorem tax at each "birthday." This changed to a one-time market value fee now at 7%. The complicated part of many parts was how the fee is split during that initial period and in later years between local and the state governments. This split has been changed in HB 329 in the 2018 session.
Much political maneuvering occurred between school boards, local governments and the state, as represented by the legislature.
A SHORT EXPLANATION OF THE SPLIT
Local Govt- 65%
Unincorporated areas- 51% of county distribution
49% to Local School Boards
Incorporated Areas- 28% to county governing authority
23% to municipal governing authority
49% to local Board of Education or independent school district
The bill states that the combined state and local title ad valorem tax remains 7% of the taxable value of the vehicle. Leased vehicles have a different section set on base payments.
The bill allows the local tag agent to collect for the county's general fund no more than a one per cent fee to defray administrative costs.
Owners of 1962 or earlier aged vehicle may opt into the payment based on a formula.
CORPORATE & PERSONAL TAX RATES-GEORGIA ON THE LOW SIDE
The 2018 General Assembly passed HB 918, containing tax cuts and changes for both individual and corporate taxpayers. The law temporarily reduces both the corporate and individual income tax rates while decoupling from certain changes in the federal tax structure. Applicable to years beginning Jan. 1, 2019, Georgia taxpayers, both corporate and individual, will decrease in tax rate from 6% to 5.75%. Starting Jan 1, 2020, the rates for both will decrease to 5.5% following a joint resolution of the Legislature. These changes sunset in ten years, on Dec. 31, 2025 if not extended.