Georgia State Senator David Shafer has released a statement signed by 17 leading Georgia economists supporting the state constitutional amendment to be offered on November’s ballot that would cap the state income tax rate at its current 6 percent. School of Economics Professor Christine Ries is one of those defending the amendment.
Economic and financial science have shown that investors avoid regions where risk is high. The term "political risk" is used to describe the likelihood that a country or region may change important public policies in the future. Much evidence demonstrates the detrimental impact of high political risk on investment proclivities. In a competitive context, investors place high value on investments in states more certain to retain conservative and responsible policies and good fiscal management.
Taken together with Georgia’s constitutionally balanced budget and assuming no increases in sales tax rates or coverage, the amendment would limit the growth in state tax revenue and spending to the growth rate of the state’s economy. The signatories to Senator Shafer's statement predict that potential investors will view an amendment as voter affirmation that stable and responsible state fiscal management will be permanent and that investments in Georgia will be free of future mismanagement predation.
Proponents of pro-growth tax reform are supporting adoption of the principle that effective tax reform must be permanent. The lower income tax rates that represent the core of pro-growth tax reform will only incentivize job creation, investment and growth if investors are assured that reductions will not be reversed. And any tax reform that substitutes higher sales taxes for lower income tax rates will only be enacted if voters are assured that income taxes won’t later be raised also.
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