Are More Tax Reforms on the Way?
Even though most Americans don’t like it, one of state government’s primary roles in the modern era is overseeing taxation, which is critical. After all, the revenue pays for the programs that many of us take for granted. While private enterprise could probably replace many government services, for better or for worse, that’s not the world in which we live.
Even so, the Georgia General Assembly has been revising the tax code and searching for ways to reduce the burden on Georgians. In 2018, the Legislature reduced the income tax rate by 0.25 percent, and lawmakers are mulling a second income tax cut this year. While many Georgians would certainly appreciate this, according to the AJC, another tax reform proposal has been gaining traction—one that would affect customers of for-hire ground transportation services. The measure has the potential to be a boon to personal mobility, public safety and the economy as a whole.
Come April 1, for-hire ground transportation services—including taxis, limos and rideshare services like Uber—will be subject to the same sales tax. Parity among similar services is important to maintain a fair tax code so that the market remains competitive and is based on a level playing field.
As it stands, certain parts of the state could face higher-than-expected sales taxes on certain products. Take Atlanta, for example, where the total sales tax comes to 8.9 percent. To put this in the context of for-hire transportation services, Atlanta rideshare users could pay one of the highest taxes on the service in the country, which represents a noticeable disparity compared to Georgia’s neighbors. Indeed, both Florida and Tennessee don’t charge a rideshare fee, and Alabama and South Carolina charge only a 1 percent tax on gross receipts per company.
Georgia lawmakers, however, have introduced a new legislative proposal that would alter the current tax model. It would exempt for-hire transportation services from sales taxes and instead charge a fee of $0.50 per ride, which would help keep prices low while still contributing to the state’s coffers. In fact, it would total around $40 million a year or more in state collections.
Taxing goods and services requires a delicate balance, which places lawmakers in an unenviable position. If the rates are too low, then the government fails to operate at full-speed, but if they are too high, it makes private services more expensive and thus disincentivizes customers from purchasing them. In the realm of for-hire transportation services, this can cause a host of negative consequences.
Rideshare companies are relatively new in the Atlanta area. They first emerged in 2012 but quickly made their mark. Five years following their arrival, Atlanta experienced 12,000 fewer impaired driving convictions, representing a 34 percent decrease. Public safety officials know what’s at least in part behind this shift: According to Cobb County Assistant Solicitor General Steven Ellis, “We have fewer impaired drivers on the road because of ride-share services.” He’s right. After all, rideshare services offer inexpensive and convenient options for people who might otherwise be tempted to drive while drunk. But if rideshare services are taxed too highly, and taxi services also bear the brunt of these taxes, then those people might be more willing to risk getting behind the wheel after too many drinks.
It isn’t just the impaired who may increasingly opt out of relying on ridesharing and taxis. Tourists would find Atlanta a little less affordable to visit. The underprivileged and the elderly, who often suffer from mobility issues, could find rides increasingly out of reach. Indeed, if consumer incomes remain largely the same but a product becomes more expensive, it stands to reason that people will purchase less of that product. And this doesn’t just hurt customers; it also harms for-hire drivers, whose fares and income will be reduced. Currently, Georgia taxicab and rideshare drivers’ median salaries are around $35,000 a year. Thus, any reduction in ridership could be painful.
Georgia-based Site Selection Magazine ranked Georgia the best place to do business seven years running, but retaining this honor means ensuring that the business environment is not burdensome. This can range from keeping taxes low and avoiding over-regulation, which will in turn help keep wages up and unemployment down. This requires lawmakers’ constant attention and periodic tweaks to the tax and regulatory codes.
Given that the current tax reform proposal would fine-tune the tax code while taking all of these issues into consideration, the measure is intriguing. It ensures that Georgia will still accrue the necessary revenue to keep the state running and maintain taxation parity among different for-hire transportation services. What’s more, it does so in a way that allows these services to continue contributing to improved public safety, helping those in need of affordable transportation, and keeping drivers working.
Image credit: Devrim PINAR
