The Rat is Out of the Hat

My son's roommate was hit by a car a couple of weeks ago. He is, thankfully and remarkably, alive but suffered extensive injuries that will require ongoing surgeries and therapy costing hundreds of thousands of dollars. Together, the coverage available on his insurance and that of the driver won't touch that cost, yet, to recover what benefits are available, he will probably need an attorney. Sen. Mitch Seabaugh thinks that if he has to hire an attorney, he also needs to pay the State of Georgia 6.5% of whatever the attorney charges him, whether or not this fee is an hourly rate or portion of the settlement. Does that make sense to you? No? Then you may have a question or two for Sen. Seabaugh.

As the Rome News-Tribune accurately reports, when it comes to tax 'reform,' Georgia Republicans have finally let the rat out of the hat. With Sen. Seabaugh leading the charge, they want to shift Georgia's tax system to "Georgia One Tax," a move that would tax what is spent, not what is earned. This would mean 6.5% tax on goods and services. In addition to the fundamental problem of shifting a greater proportion of the tax burden to poor and middle class Georgians while providing a tax haven for high income earners, who already pay a lower portion of their income in taxes than other earners in Georgia, the concept of taxing services opens a Pandora's Box of problems. Consider these questions:

1) If a doctor charges $100.00 for an appointment, but the negotiated rate with the insurance company is $60.00, and the patient has a $15.00 co-pay, what would be taxed? The full amount? The co-pay? The negotiated rate? And, when would the sales tax be paid? At the time of the appointment or at the time of payment? It should come as a surprise to no one that people do not always enter a doctor's office prepared to pay their bill. If they are not able to pay the sales tax at the time of the appointment, what is the doctor supposed to do? Refuse care? That would be unethical.

2) What about attorneys who represent those who are trying to negotiate the maze of getting their Social Security Disability claims approved? In these cases, the fee is set by federal law to one fourth of back benefits or $5300.00, whichever is less. Bear in mind that to get back benefits, a judge or a court must have found that the Social Security Administration was wrong to turn down the application in the first place. Bear in mind that some individuals have been waiting not months, but years for a hearing. (The Atlanta Office of Hearings and Appeals, where the average person must wait over 800 days from the time of the request for the hearing, has the worst track record in the nation.) So, should this person, who has been unable to work and wrongly denied benefits, pay the State of Georgia 6.5% of the fee his attorney has earned? And, just how should the lawyer collect that fee? Attorney fees in these cases are paid directly to the lawyer by the Social Security Administration. Does he bill the claimant for the sales tax? What if they don't pay it? Would the federal government even allow the lawyer to collect the tax over and above the fee they have already limited?

3) Just the above two examples show that this proposal would create an undue burden for small businesses, especially professional practices. It is conceivable that a small business would have to hire an additional employee just to deal with this sales tax issue. Who do you think will end up covering that cost?

What Sen. Seabaugh and the Georgia GOP really want is for small business and entrepreneurs to become the tax collectors for the State of Georgia. What he really wants is to protect the wealthy by passing a greater share of the tax burden to the middle class. Sen. Seabaugh may be fine with that, but are you?

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