Many Newton County residents will be affected by changes coming to Georgia's tax code, after the Georgia General Assembly overwhelmingly passed its tax reform bill last week.

Multiple measures in H.B. 386 could have sweeping affects for residents by increasing the state income tax exemption for married couples by $2,000, doing away with the annual "birthday tax" for vehicles purchased after March 1, 2013, requiring some online retailers to collect sales tax and reinstating the sales tax holiday for school supplies and energy-efficient items.

The bill, if signed by Gov. Nathan Deal, is expected to make Georgia more competitive in its efforts to attract and retain industry and could lower many individuals' tax burdens, but it's also expected to hurt local tax revenues, which could lead to either higher local tax rates or a reduction in services.

Marriage tax exemption
Married couples will now get a larger state tax exemption just for being married. Currently, couples are able to exempt, or avoid being taxed, on $5,400 when they file their taxes jointly, but this bill will increase the state exemption by $2,000 to $7,400.

Car sales charges revamped
Totally revamping taxes paid on cars was one of the most significant changes in H.B. 386. Currently, Georgians pay two taxes on their car, a sales tax when they purchase the car and an annual ad valorem tax that is due on the owner's birthday.

H.B. 386 does away with both of those taxes and replaces them with a single 7 percent title fee that is charged whenever a car is registered in the state. (The fee will actually start at 6.5 percent and eventually increase to 7percent.)

All car sales will be subject to this, including sales between two private individuals; previously only sales by businesses were subject to sales tax. Sales between family members will not be affected.

"Aside from eliminating the politically-unpopular "birthday tax," this reform would increase state revenue by extending motor vehicle taxes to two types of vehicles not currently subject to Georgia's sales tax: vehicles sold between individuals ("casual sales") and autos purchased out of state," according to the budget policy institute analyst Wesley Tharpe.
Ginn Chevrolet Owner Billy Fortson said the change will level the playing field between official car dealers and individuals who buy and sell cars without a license.

"We have some people who are really in car business without a license and are not collecting sales taxes. They'll buy cars on sale and then put it in their front yard and sell it for a profit and then do the same thing again," Fortson said.

The budget policy institute estimates this will be the big revenue generator for the state, bringing in $503 million during the next three budget years and helping to offset many of the tax breaks included in the bill.

While the bill will bring in money to the state, it is likely to greatly reduce revenue earned by local counties over time. Since the 7 percent sales tax and 7 percent title fee essentially cancel each other out, residents are saving money by not having to pay annual taxes on their car.

The state captures only a very small portion of that annual ad valorem, or property, tax; however, local governments depend on property taxes for much of their revenue. Currently, on a $20,000 car, the state would collect only $2 per year, while Newton County collects $87.28 per year.

As of calendar year 2011, the county had roughly 100,000 vehicles on its digest valued at $569 million, according to Chief Tax Appraiser Tommy Knight.

As of now, only new car purchases after March 1, 2013 will be on title fee system, but by 2023 all car owners will be taken off the annual property tax system, according to the budget policy institute.

Economic development measures
Local chamber officials and State Sen. Rick Jeffares, R-Locust Grove, said one of the most important elements in the bill is a provision that will eliminate taxes that industries pay on the energy they use in production.
According to the Georgia Budget Policy Institute, which analyzed the bill, Georgia is the only state in the southeast and one of only 10 states in the nation which still taxed energy used in manufacturing.

"I think Newton County is a big winner because of the manufacturing facilities we have. Doing away with the energy tax was a big component," said Jeffares. "I have heard of industries not coming here because surrounding states don't have an energy tax. I've also heard talk of companies saying if we don't do something (about the energy tax) they're leaving."

Hunter Hall, president of the Covington-Newton County Chamber of Commerce, agreed that the tax elimination would benefit Newton County, which has a large manufacturing base.

The tax will be phased out during the next four years, and is expected to reduce state revenue by $137 million once fully implemented. According to the budget policy institute, local governments will still be able to charge a 2 percent excise tax on energy, "which should help shield them from a potentially-sizable loss of revenue."

Another change that could have a slight negative effect on Newton County is the fact that film productions will now have to pay sales tax on products they buy in Georgia. Previously, companies received a sales tax exemption. However, the much more significant 30 percent income tax credit that productions received remained untouched. The 30 percent incentive is hailed as a major reason that more productions are filming in Georgia.

"Because it was all up or all down vote, the question we dealt with was would we rather help efforts to recruit industry or would we rather keep 7 percent sales tax exemption on products purchased for film production," Hall said. "We felt it was more beneficial to side with recruiting and retaining local industry than to have the sales tax exemption, because we knew they were going to keep the 30 percent incentive. But we did ask for opportunity to take out the loss of the sales tax exemption."