Extending A Tax Increase An Issue For Some in GOP

Today’s Courier Herald Column:

Often, tax increases are passed as “temporary” measures to make a reluctant public slightly more willing to accept higher payments under the premise that the taxes will eventually go away.  They rarely do.

Local option sales taxes are a prime example.  Even the current regional T-SPLOST referendums include in the supporters talking points that the 10 year tax is temporary.  The 20 year toll on Georgia 400 in Atlanta was sold as temporary, yet will be collected through at least year 30 of operation, at which point it may well be extended again.

While much of the press from this weekend’s Georgia Republican Convention was on the battle over ethics reform, another legislative battle for the next session was more quietly added to the queue.  Hospital bed taxes, passed two years ago as a temporary measure to plug holes in a cash starved state budget, will be up for renewal.

It is not lost on some grassroots members that the tax was created and enacted by a Republican dominated legislature and signed by a Republican Governor.  Like the resolution over ethics reform, grassroots Republicans wanted to send an early message to those they helped elect that the principles espoused during campaigns need to be those they adhere to when governing.

The tax was designed to capture additional federal funds by adding a charge to hospital bed stays.  It raises about $200 Million at the state level and takes in roughly the same amount in federal tax dollars from matching payments.

Opponents of the tax wanted to use the convention to start the conversation regarding the tax renewal prior to the primaries to be held in July.  Qualifying for state and local offices is Wednesday through Friday this week.

When passed in 2010, the tax became one of the most controversial items of that pre-election session.  Grover Norquist of Americans for Tax Reform renewed his long running battle with then Governor Perdue, chiding him for not only proposing the bed tax, but reminding him of his earlier cigarette tax increase to plug holes in his first budget saying he “refused to restrain spending.”

The bed tax was originally passed in the wake of the financial and real estate collapse when furloughs were prevalent and spending was being slashed.  Because much of the cost of the tax was passed on to the federal Medicare system, supporters looked at the tax as a way to return more federal tax dollars to Georgia.

The current fiscal environment is much improved, however.  Tax receipts have increased at double digits for over a year.  Fiscal restraint also appears to be easing, as the most recent budget reflects roughly a billion dollars of additional spending over the previous one.

Georgians who noticed that budgets increased according to the amount of revenue available under the previous Governor and were only cut when revenues fell are looking at the new spending patterns with a bit of unease.  Revenues are increasing again, but so is spending.  Yet to handle “critical” upgrades in infrastructure, Georgians are asked to increase their own taxes through regional T-SPLOST referendums to transfer even more money into government coffers.

The Hospital Bed Tax stands as the opportunity for those who want to slow the amount of money going into state coffers as the way to restrain spending.  They believe the evidence shows that government spends all money available to them.  Thus, the only sure method to control government and its reach is to deny money available where possible.

The battle lines are drawn, but who will engage in the battle is less certain.  The number of incumbents who will receive primary challenges remains uncertain but appears to be somewhat limited.  As such, incumbents have little fear of the voters even when legislating against the stated campaign agenda.

Voting against ethics reform remains a nebulous concept to voters.  Voting for tax increases is another matter entirely.  Whether opponents of extending the tax can successfully make this an issue in the 2012 campaign remains the biggest variable in campaign calculus as we approach candidate qualifying.