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1 Justin Higginbottom, Georgia Should Respond to Recession with Tax Reform, Not Tax Gimmicks 1 (2010)

handle is hein.taxfoundation/ffcbcxz0001 and id is 1 raw text is: FOUNDATION
February 19, 2010
No. 212

FISCAL
FACT

Georgia Should Respond to Recession with
Tax Reform, Not Tax Gimmicks
By Justin Higginbottom
Introduction
Georgia recently has come off a large drop in tax revenue that required Governor Purdue to cut
some public spending. While tax revenue is expected to stabilize soon, federal stimulus money
will run out in 2012, so champions of higher taxes and state spending are pointing with alarm at
the long-range projected budget gap of over $2 billion.
Tax hike proposals are proliferating, with the intention of either preventing more spending cuts or
making possible new spending increases. Two of the most frequently mentioned so far are a
cigarette tax hike (from $.37 to $1.37) and a hospital tax.1 But targeted tax hikes and increasing
the size of Georgia's troubled Medicaid system is not the path to sound tax policy and stable
revenue.
Recessions can stimulate needed tax changes. Georgia should take this opportunity to get smarter
with its tax policy, doing everything possible to soften a future recession's blow and increase
reliable revenue now. This report summarizes Georgia's tax climate and proposes reform for this
end.
Overview of Georgia's Tax Climate
The Tax Foundation's 2010 State Business Tax Climate Index, a measure of how conducive a
state's tax system is to non-distorted economic growth, ranked Georgia 29 out of 50, where 1 is
the best tax system (see Table 1). This places Georgia's tax system close to the middle nationally,
though Georgia has a lower ranking than four of its five neighboring states.2
1 Higginbottom, Justin, Tax Foundation Fiscal Fact, No. 203 State Hospital and Medical Provider Taxes: Not What
the Doctor Should Order..
2 Alabama: 19; Florida: 5; North Carolina: 39; South Carolina: 26; Tennessee: 22. Padgitt, Kail, Tax Foundation
Background Paper, No. 59, 2010 State Business Tax Climate Index.

Justin Higginbottom is an analyst at the Tax Foundation.

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