State legislators are considering a major overhaul of the state’s tax structure that may see consumers paying sales tax for groceries, but paying less in personal income taxes.

The 98-page “2010 Special Council on Tax Reform and Fairness for Georgians” was presented to the governor, lieutenant governor and state legislative leaders in January, and then the Special Joint Committee on Georgia Revenue Structure will make its recommendations to legislators. As Rep. Gene Maddox and Sen. John Bulloch had previously said, the tax reform package must be voted on in its entirety.

The council was charged with examining the tax structure and to look at how the tax laws could be revised so potential businesses and industry would be more attracted to locate in Georgia.

“While Georgia is a low-tax state with a relatively competitive business environment, the existing tax structure contains duplication, lacks clarity, imposes significant compliance costs on taxpayers and hasn’t kept pace with the modern economy,” the report stated.

It also said that Georgia’s tax policy should foster strong economic growth, job creation, and a rising standard of living for all Georgians.

An analysis of the report said the current personal income tax in Georgia is a complex system with numerous brackets, exemptions, deductions and credits; and further, that the current tax brackets have remained unchanged since 1937, with one exception being the elimination of the 7 percent bracket in 1955.

However, Georgia is heavily reliant on the personal income tax, as it accounts for almost half of the total tax revenues.

Furthermore, the council received many comments on local tax issues, such as the property tax system, but the council considered property tax to be a local tax matter and outside its scope.

“The Council’s guiding principles infer that the tax burden should be shifted from income tax to sales and use tax or consumption tax. Revenues generated as the sales and use tax base is broadened should be used to lower income tax rates.”

As for the tax burden, the council said Georgia currently ranks 49th in the United States in revenue per capita at $1,492. Only South Carolina was lower.

“The data suggests that, relative to other states, state taxes in Georgia are very low while local taxes are approximately average,” the report states.

Among the recommendations for personal and corporate income taxes in Georgia, the council recommends the following: Replacing the existing six tax brackets with a single flat tax rate not to exceed 4 percent, effective January 2014; eliminate all Georgia itemized deductions, standard deductions and personal exemptions for taxpayers; maintain parity of tax rates for corporations and individuals by taxing both at a rate no greater than 5 percent in January 2012, future reduction in corporate tax income tax rate should match the personal income tax rate; eliminate all current economic development tax credits in 2012.

Sales and use tax

The council said “the current sales and use tax base has not kept pace with changes in the Georgia economy, in particular, with the growing importance of services and remote sales. In addition, the state has adopted numerous sales tax exemptions that have eroded the base.”

There are more than 110 sales tax exemptions in the state’s tax code.

Two of perhaps the more well-liked exemptions by residents of the state are of sales tax on food for home consumption, and the sales tax holidays on school items, apparel and energy efficient products.

The council is recommending that the food for home consumption exemption be eliminated June 30, and that the exemption for food purchased with food stamps and WIC be retained. It is also recommending that the legislature not re-enact sales tax holiday legislation.

Personal services are also targeted for taxation.

Georgia currently taxes 36 of the 166 identified services that is taxed by at least one state.

“With most services excluded from the sales tax base, Georgia’s sales tax revenues have lagged relative to the overall economy. Not taxing many services means that the tax base has become increasingly narrow, requiring a higher tax rate to obtain the same revenue, and providing an incentive to purchase services rather than tangible personal property,” the report stated.

Among some of the services the council recommends a sale tax on are clothing cleaning, garbage pick-up, housekeeping and lawn care services, haircuts, membership fees, vehicle maintenance and repairs.

Among some of the other recommendations are that sales and use tax be applied to casual sales of titled personal property, including motor vehicles, watercraft and aircraft.