Georgia Needs to Collect Current Sales Taxes Before it Considers Raising Taxes

MCDONOUGH, Ga. - Funding of necessary programs in Georgia, primarily education, has been slashed as state coffers continue to collect smaller revenues from out-of-work taxpayers and plummeting real estate values.

The only idea currently bantered around universally to increase revenue is to replace the state sales tax on food, which was completely eliminated in 1998 after a three-year phase-in. Reinstating this tax is nothing more than an additional tax on the poor and does not address an underlying problem with our current sales tax system. Georgia is not collecting all the sales tax that is being charged by merchants now.

At a recent county Democratic Party meeting, Joe Martin, candidate for Georgia's Superintendent of Schools, put the matter thus:

"I'm just going to tell you like it is," Martin said. "I'm not going to fool around. We need greater investment in our schools. Does that mean we're going to raise taxes? No. What it does mean is that we need to stop these exemptions. It does mean that we improve the collection of sales tax. If Alabama can do it, why can't Georgia?"

While the remark received a hearty laugh from the audience, the issue is no laughing matter.

In February of this year, the legislature proposed a plan to cross-reference business licenses with sales tax receipts to ensure that proper collections are being made. The current hold up: Republicans want the Georgia Department of Revenue to oversee the sales tax project; Democrats want it placed in the hands of local authorities.

A third option: allow private companies to take over the sales tax collection process.

In numerous letters to newspaper editors who have advocated privatization of sales tax collections, Commissioner Bart Graham has argued for his agency maintaining control, primarily because of his concern that privatization or local administration would violate privacy laws. He has also admitted, however, that the State of Georgia has nearly $1.6 billion in uncollected tax revenue since 1988. He has made these letters public on the Department's website. While he purports to have collected $515 million in past-due tax collections over the last five years, he never conveys any assurance that steps have been implemented to curtail the amount of arrearages in the future. These numbers reflect uncollected taxes of all tax types, and they all need to be collected but, to me, the uncollected sales tax is especially egregious.

This is our money - money paid by Georgia citizens during the purchase of goods and services that have not been remitted by businesses to the state. In addition, the Commissioner concedes in these letters that numerous late fees and penalties are waived by the department. Commissioner Graham seems concerned that private collection firms, working on a percentage of revenue, would not be as lenient.

Why are we concerned with leniency to a business that has collected money on behalf of the state but has failed to remit that money to the state? That same business does not allow customers to walk out of the store without paying the appropriate sales tax first.

Commissioner Graham's first concern should be collection of all monies rightfully and lawfully due to the state, a state which is mired in budget cuts because of a shortage in revenues.

I understand the arguments against privatization. There can be issues of privacy, but there have been leaks of confidential information from government agencies as well. Also, the state will lose the fee (usually a percentage of collections) to be paid to any private collection agency, but it may be a necessary expense. The state's track record is not encouraging. Some of the lost revenue can be recouped by reducing the workforce at the Department of Revenue. Some will be recouped by stepped up enforcement and collections.

If the Department cannot collect sales tax, all taxes for that matter, efficiently and effectively, the powers that be need to make sure someone is put in place that can - and before they try to fix the problem simply by raising additional taxes.

Sources: Georgia Department of Revenue website

Special Council on Tax Reform and Fairness for Georgians

Personal reporting from Rockdale County Monthly Democratic Party Meeting on August 25, 2010