Georgia Tax and Spending by the Numbers

By Kelly McCutchen

 

How has Georgia responded to the Great Recession compared to other states? The latest data from the Census Bureau tells us some things we knew and some things some might find surprising.

Everyone likes rankings, but it’s very important to make sure state-to-state comparisons are fair. Some states are very decentralized, with local government accounting for a large portion of all government spending, while state government plays a larger role in other states. State spending on K-12 education, for example, ranges from 31 percent in Nevada to 85 percent in Hawaii. For this reason, it is important when comparing states to examine state plus local spending. In addition, comparing spending as a percentage of personal income (rather than spending per capita) accounts for cost of living differences.

Georgia is commonly characterized as an extremely low spending and low tax state. An apples-to-apples comparison ranks Georgia 38th in taxes and 34th in spending — below the national average, but above roughly one quarter of the states. This Census Bureau data is from 2009, two years after the recession officially began in 2007.

A deeper analysis highlights areas where Georgia is high or low relative to other states. In terms of revenue, insurance premium taxes (6th), alcoholic beverage taxes (8th), higher education charges (43rd), motor fuel taxes (43rd), motor vehicle licenses (49th) and tobacco taxes (43rd) stand out.

On the spending side, K-12 education (8th), K-12 construction (5th), correctional institutions (13th), education scholarships (8th), highways (47th) and interest on debt (49th) are notable.

These comparisons indicate where we might be able to shift resources from areas of overspending to meet critical needs in other areas. For example, Georgia clearly has a need for additional investment in transportation. Georgia’s motor fuel taxes are $70 lower per person than North Carolina and Florida. Based on Georgia’s 2009 population of 9.6 million, increasing Georgia’s motor fuel taxes up to the level of North Carolina or Florida would raise more than $670 million annually.

At the same time, if Georgia reduced its capital spending on school construction to the southeastern average it would save $84 per person, or more than $800 million annually. Since school construction is primarily funded at the local level, this would provide an opportunity for a substantial property tax cut.

Georgia began an effort last year to make its criminal justice system more effective and efficient. If these criminal justice reforms are successful in getting corrections spending down to the southeastern average, it would save more than $300 million annually.

There is room for improvement even in areas where we are ranked near the national average. Consider personal income taxes (26th) and property taxes (28th). The average Georgian is paying $361 more income tax and $154 more property tax than the southeastern average. Both of these taxes are harmful to economic growth – something to remember as hundreds of thousands of Georgians remain unemployed.

Economists predict state revenues will not return to pre-recession levels for several more years. Just like a family that cuts back on going out to eat in order to save money to buy necessities, Georgia must make tough decisions based on its existing revenues. The good news is an objective look at our spending indicates opportunities to make our state more competitive by prioritizing spending at both the state and local level.

Selected Categories Representing 80% of General State and Local Revenues from Own Sources (FY 2009)
Rank based on percentage of state personal income

Amount

Per Capita

Per Capita

Description

(thousands)

Rank

GA

Southeast

Tax – Property

$10,438,954

28

$1,085

$931

Tax – General Sales

$8,981,969

16

$934

$939

Tax – Individual Income

$7,801,185

26

$811

$449

Charges – Public Hospital

$3,623,512

15

$377

$613

Charges – Higher Education (Tuition)

$1,655,327

43

$172

$255

Charges – Sewerage

$1,060,666

24

$110

$107

Tax – Motor Fuels Sales

$861,153

43

$90

$140

Tax – Insurance Premiums

$730,024

6

$76

$44

Tax – Corporation Net Income

$694,717

38

$72

$96

Charges – Solid Waste Management

$561,739

12

$58

$53

Tax – Alcoholic Beverage Sales

$295,652

8

$31

$36

Tax – Motor Vehicle License

$283,406

49

$29

$56

Tax – Tobacco Sales

$229,673

43

$24

$28

 
Selected Categories Representing 80% of State and Local General Expenditures (FY 2009)
Rank based on percentage of state personal income

Amount

Per Capita

Per Capita

Description

(thousands)

Rank

GA

Southeast

Current Operations – Elementary & Secondary Education

$15,907,442

8

$1,653

$1,360

Current Operations – Welfare, Vendor Payments for Medical Care

$7,779,551

31

$809

$957

Current Operations – Higher Education

$4,316,048

38

$449

$554

Current Operations – Own Hospitals

$3,826,875

16

$398

$606

Construction – Elementary & Secondary Education

$2,334,126

5

$243

$159

Current Operations – Police Protection

$2,152,895

25

$224

$245

Current Operations – Health Services

$2,035,158

26

$212

$252

Construction – Highways

$1,890,154

33

$196

$206

Current Operations – Correctional Institutions

$1,729,540

13

$180

$144

Interest on General Debt

$1,471,573

49

$153

$234

Current Operations – Welfare

$1,429,130

34

$149

$130

Current Operations – Highways

$1,158,750

47

$120

$156

Current Operations – Housing & Community Development

$1,018,661

20

$106

$90

Current Operations – Judicial and Legal Services

$998,213

24

$104

$90

Education Scholarships

$862,565

8

$90

$93

Current Operations – Other Education

$672,033

18

$70

$53

For more information, go to https://live-gppf.pantheonsite.io/pub/Agenda2012/fiscaloverview.pdf.


Kelly McCutchen is president of the Georgia Public Policy Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (February 3, 2012). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.

 

By Kelly McCutchen

 

How has Georgia responded to the Great Recession compared to other states? The latest data from the Census Bureau tells us some things we knew and some things some might find surprising.

Everyone likes rankings, but it’s very important to make sure state-to-state comparisons are fair. Some states are very decentralized, with local government accounting for a large portion of all government spending, while state government plays a larger role in other states. State spending on K-12 education, for example, ranges from 31 percent in Nevada to 85 percent in Hawaii. For this reason, it is important when comparing states to examine state plus local spending. In addition, comparing spending as a percentage of personal income (rather than spending per capita) accounts for cost of living differences.

Georgia is commonly characterized as an extremely low spending and low tax state. An apples-to-apples comparison ranks Georgia 38th in taxes and 34th in spending — below the national average, but above roughly one quarter of the states. This Census Bureau data is from 2009, two years after the recession officially began in 2007.

A deeper analysis highlights areas where Georgia is high or low relative to other states. In terms of revenue, insurance premium taxes (6th), alcoholic beverage taxes (8th), higher education charges (43rd), motor fuel taxes (43rd), motor vehicle licenses (49th) and tobacco taxes (43rd) stand out.

On the spending side, K-12 education (8th), K-12 construction (5th), correctional institutions (13th), education scholarships (8th), highways (47th) and interest on debt (49th) are notable.

These comparisons indicate where we might be able to shift resources from areas of overspending to meet critical needs in other areas. For example, Georgia clearly has a need for additional investment in transportation. Georgia’s motor fuel taxes are $70 lower per person than North Carolina and Florida. Based on Georgia’s 2009 population of 9.6 million, increasing Georgia’s motor fuel taxes up to the level of North Carolina or Florida would raise more than $670 million annually.

At the same time, if Georgia reduced its capital spending on school construction to the southeastern average it would save $84 per person, or more than $800 million annually. Since school construction is primarily funded at the local level, this would provide an opportunity for a substantial property tax cut.

Georgia began an effort last year to make its criminal justice system more effective and efficient. If these criminal justice reforms are successful in getting corrections spending down to the southeastern average, it would save more than $300 million annually.

There is room for improvement even in areas where we are ranked near the national average. Consider personal income taxes (26th) and property taxes (28th). The average Georgian is paying $361 more income tax and $154 more property tax than the southeastern average. Both of these taxes are harmful to economic growth – something to remember as hundreds of thousands of Georgians remain unemployed.

Economists predict state revenues will not return to pre-recession levels for several more years. Just like a family that cuts back on going out to eat in order to save money to buy necessities, Georgia must make tough decisions based on its existing revenues. The good news is an objective look at our spending indicates opportunities to make our state more competitive by prioritizing spending at both the state and local level.

Selected Categories Representing 80% of General State and Local Revenues from Own Sources (FY 2009)
Rank based on percentage of state personal income

Amount

Per Capita

Per Capita

Description

(thousands)

Rank

GA

Southeast

Tax – Property

$10,438,954

28

$1,085

$931

Tax – General Sales

$8,981,969

16

$934

$939

Tax – Individual Income

$7,801,185

26

$811

$449

Charges – Public Hospital

$3,623,512

15

$377

$613

Charges – Higher Education (Tuition)

$1,655,327

43

$172

$255

Charges – Sewerage

$1,060,666

24

$110

$107

Tax – Motor Fuels Sales

$861,153

43

$90

$140

Tax – Insurance Premiums

$730,024

6

$76

$44

Tax – Corporation Net Income

$694,717

38

$72

$96

Charges – Solid Waste Management

$561,739

12

$58

$53

Tax – Alcoholic Beverage Sales

$295,652

8

$31

$36

Tax – Motor Vehicle License

$283,406

49

$29

$56

Tax – Tobacco Sales

$229,673

43

$24

$28

 
Selected Categories Representing 80% of State and Local General Expenditures (FY 2009)
Rank based on percentage of state personal income

Amount

Per Capita

Per Capita

Description

(thousands)

Rank

GA

Southeast

Current Operations – Elementary & Secondary Education

$15,907,442

8

$1,653

$1,360

Current Operations – Welfare, Vendor Payments for Medical Care

$7,779,551

31

$809

$957

Current Operations – Higher Education

$4,316,048

38

$449

$554

Current Operations – Own Hospitals

$3,826,875

16

$398

$606

Construction – Elementary & Secondary Education

$2,334,126

5

$243

$159

Current Operations – Police Protection

$2,152,895

25

$224

$245

Current Operations – Health Services

$2,035,158

26

$212

$252

Construction – Highways

$1,890,154

33

$196

$206

Current Operations – Correctional Institutions

$1,729,540

13

$180

$144

Interest on General Debt

$1,471,573

49

$153

$234

Current Operations – Welfare

$1,429,130

34

$149

$130

Current Operations – Highways

$1,158,750

47

$120

$156

Current Operations – Housing & Community Development

$1,018,661

20

$106

$90

Current Operations – Judicial and Legal Services

$998,213

24

$104

$90

Education Scholarships

$862,565

8

$90

$93

Current Operations – Other Education

$672,033

18

$70

$53

For more information, go to https://live-gppf.pantheonsite.io/pub/Agenda2012/fiscaloverview.pdf.


Kelly McCutchen is president of the Georgia Public Policy Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (February 3, 2012). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.

 

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