States eye levies on services to close shortfalls

Flags for the U.S. and the state of Georgia

Kerry Guthrie owns "My Favorite Automotive" in Atlanta. Here, she cleans out part of the air intake of a Ford Mustang. Currently, the auto owner won't pay a state tax for the service, but that could change under a proposal now making its way through the Georgia legislature.

"My Favorite Automotive" in Atlanta.

Dorothy Brown is a law professor at Emory University. She says it's perfectly legal for states to tax some services while exempting others.

Steve Chiotakis: Lawmakers in Georgia begin to debate a new budget this week. The state has a gaping budget deficit.

And as Jim Burress reports from station WABE in Atlanta, some legislators have been calling for a tax on services to bridge the gap.


Jim Burress: Georgia lawmakers don't like to talk about increasing taxes. But in the face of at least $1 billion in red ink, they are willing to push tax "reform."

Mickey Channell: This is about fairness, and to encourage more investment in all corners of the state.

A while back, Georgia representative Mickey Channell and fellow Republicans unveiled a plan to balance the budget. They'd add a tax to most services. But that didn't sit well with providers of those services. And one by one, many services became exempt.

Channell: We're not going to tax haircuts, legal services, AAA memberships, Sam's Club, Costco memberships.

Or vet visits, dry cleaning. In the end, only three services remained: satellite TV, used car sale and car repairs.

Kerry Guthrie: My name is Kerry Guthrie, and I'm owner of My Favorite Automotive on DeKalb Avenue in Atlanta.

Standing underneath a hoisted purple Subaru in for suspension repair, Guthrie says a new auto service tax would add $8 or so to this customer's bill. It's an expense she says she'd like to absorb, but just can't.

Guthrie: It's all I can do to stay on DeKalb Avenue and keep the doors open as it is in this economy.

Guthrie feels mom-and-pop auto shops don't have the political clout that other businesses in Georgia are able to wield. Dorothy Brown agrees. She's a law professor at Emory University who specializes in tax policy.

Dorothy Brown: If you're Coca-Cola, and this is Georgia, I wouldn't expect there to be a tax on Coke.

That's because Coke is based here. But Colorado and Washington, also faced with budget shortfalls, have passed a soda tax.

Brown: And you see states looking at all kinds of ways to raise revenues. So I certainly don't fault Georgia with trying to make sure its budget stays balanced, it's just how do you do it and whose ox are you going to gore?

The bottom line -- whatever services are eventually taxed -- taxpayers are going to foot the bill.

In Atlanta, I'm Jim Burress for Marketplace.

About the author

Jim Burress is a reporter for WABE in Atlanta.

Kerry Guthrie owns "My Favorite Automotive" in Atlanta. Here, she cleans out part of the air intake of a Ford Mustang. Currently, the auto owner won't pay a state tax for the service, but that could change under a proposal now making its way through the Georgia legislature.

"My Favorite Automotive" in Atlanta.

Dorothy Brown is a law professor at Emory University. She says it's perfectly legal for states to tax some services while exempting others.

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