By Mike Klein
Warning: Your star ship is about to land on Planet Wonky! After all, discussions about whether to broaden the tax base, change exemptions and deductions and other such discourse are, if nothing else, wonky. Even the wonkiest of wonks admit that what they do is too wonky for most folks. But ah ha! Now there is a wonky game for even the least wonky among us.
TaxReformTheGame.Com has launched on the internet. It is your ticket to rewriting Georgia’s tax code all by yourself using the two simplest rules in the game: Point and Click. Each time you point and click, each time you change the data going in, you get a different result coming out. That is, you either increase or decrease state revenue which, in turn, will increase or decrease what the state can afford.
The real value of TaxReformTheGame.Com is not that it will produce new revenue ideas nobody else has ever considered. But for even the most novice users, it should produce a better understanding about how tax policy decisions are inter-connected, sort of like links in a chain. Each link needs to do its own job or eventually the chain is not strong enough to perform the required work.
Enough discourse, let’s play!
Open another browser page and go to TaxReformTheGame.Com. You are now on Planet Wonky! The box on the right side shows the Fiscal 2012 real Georgia revenue, some $16 billion, broken down into personal and corporate income tax, sales and use taxes, excise taxes and other taxes. The boxes on the left side allow you – the newly wonky you – to change the tax code.
There is no right or wrong result. If you want to increase state tax revenue to $20 billion or decrease it to $15 billion begin to adjust the numbers in the left-side boxes until you get the result you want. Here’s a challenge: Try to reduce the state personal income tax rate from the current 6 percent maximum to your preferred 3 percent and still retain $16 billion revenue.
Let’s see what happens. I just typed 3.00 percent into the box; then I clicked inside the personal income tax rate box to move the sliding bar. (That seemed easiest to me; you can try just moving the bar.) Wow! You just reduced state revenue by $3.592 billion. Those are real dollars that would not be available for education, health care, salaries or anything else that receives state financial support.
Let’s presume you are still firmly committed to that 3 percent personal income tax rate, but you want to accomplish the goal without reducing state services. This is where you have to look at all the other options for replacing $3.592 billion. Remember, none of these changes occurs in a vacuum. Personal income tax revenue accounts for more than half of annual state income. So each time you dramatically shift personal income tax rates that will cause the revenue to move around.
Okay, it’s just a game, right. How hard can it be to make up $3,592 billion? You are in charge of Planet Wonky. You can re-impose the state 4 percent sales tax on food; you can impose new personal and household services taxes; you can almost double the tax collected on cigarette sales and you can change telecommunications taxes. Go ahead, make the changes. Just point and click. That should do it, right?
Not even close. You still have a $2.456 billion hole that you created with your much lower 3 percent maximum personal income tax rate. Okay, let’s try again. Maybe a 4 percent personal income tax rate would help. And yes, it does, but you still have a $1.259 billion hole in the revenue model. Okay, how about 5 percent? Now you are down to $61 million in reduced revenue.
Yes, you decreased the state personal income tax rate by 1 percent but you had to impose – or in the case of state sales tax on food – re-impose other taxes to keep revenue “neutral” which is the fancy word everyone on Planet Wonky uses to suggest things stayed about the same. And none of this even begins to consider the consequences of politics. This is just how your numbers play out.
But remember you began this exercise committed to a 3 percent personal income tax rate. Maybe there is another way to accomplish that without re-imposing the state sales tax on food or a host of new taxes such as personal services. How about 3 percent on income tax and 6 percent on sales tax? That leaves you with a $943 million revenue hole. This tax policy stuff is full of challenges.
TaxReformTheGame.Com was created by Georgia Tech economics professor Christine Ries after she became frustrated with the lack of easy public access to meaningful state tax data. We wrote about that in an earlier article so just click here and you will get all that background. The Georgia Public Policy Foundation worked with Ries to develop and test the model.
We’re not done yet. Enhancements will expand the amount of detail in TaxReformTheGame.Com. You will be able to drill deeper into tax data, even down to individual zip codes.
Welcome to Planet Wonky. You are now one of us.
I wanted to publicly say how much I appreciate Georgia Public Policy Foundation. For those of you that will be entering the Legislature or are relatively new you may not quite yet appreciate how much we rely on Georgia Public Policy Foundation’s research and work. As you know we’re a citizen’s legislature. We have very little staff. They have been an invaluable, invaluable resource to us. To put this [Forum] on and the regular programs that they do throughout the year make us better at what we do. (At the 2012 Georgia Legislative Policy Forum.)