State Spending Limit Proposed

January 30th, 2011 by Comments Off on State Spending Limit Proposed

One of the biggest challenges of Georgia's proposed tax reform is avoiding 1) a tax increase or 2) a shortfall in taxes when your rainy day fund is almost empty. Taxpayers are rightly skeptical that elected officials will reduce taxes if revenues come in higher than expected. Of course, one of the reasons we are in this mess is we spent too much money during the good times. Looking at total funds, spending increased by $4 billion from 2006 to 2008. From 2009 to 2011, spending still increased $650 million.

The solution? A reasonable spending limit that would limit the high spending during good times and prevent dramatic cuts during recessions. This would also provide taxpayers a sense of security that a tax shift doesn't become a tax increase. 

The Marietta Daily Journal provides a good overview

Senate Resolution 20 would restrict the state from spending any money in excess of the previous year budget adjusted for inflation and population. Any additional revenue beyond the spending limitations would be required to go into the rainy day fund until it reaches a point of 15 percent of the previous year's spending. Once the rainy day fund is at 15 percent, additional revenue would be used to slowly phase out the state income tax.

For example, said Senate Majority Chip Rogers (R-Woodstock), who authored the legislation, you would take last year's budget, and that budget could only increase by a percentage of population plus inflation, so if you had a 2 percent population increase and a 3 percent inflation increase, the budget could go up 5 percent max.
"And if any revenue came in beyond that limit, it would have to go into the reserve fund, and once the reserve fund is full then the state would actually have to lower the income tax rate by one quarter of 1 percent," he said.

Rogers said critics of the bill are big spenders.

"The argument against it is really made by those people who just want to spend more money," Rogers said. "They don't want there to be any limit on what we spend."

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The late U.S. Senator Paul Coverdell more quotes