Like the majority of Americans today, I have had the opportunity to work and build economically at home due to the service of our veterans at home and abroad.  Clearly, our veterans sacrifice economically for their service to our country.  Accordingly, as my first bill of significance in the Georgia Legislature, I want to exempt military retirement income from Georgia income taxes and pay for it with an increase in the cigarette tax.  The impact will be revenue-neutral.

The cost of this exemption will be approximately $83 million.  So, how do we pay for it? The bill covers the cost of removing military pensions from Georgia income tax by increasing the Georgia cigarette tax from 37₵ per pack to 55₵ per pack.  This 18₵ increase should provide approximately $83 million.  Currently, the Georgia tobacco tax is the 48th lowest in the US.  The national average is $1.60 per pack.  The current tax generates $200 million per year in revenue.  However, smokers are responsible for $537 million per year in Medicaid costs!   Therefore, we have over a $300 million gap in providing care for smoking related illness.  Let’s be clear on this.  18% of Georgians smoke.  The 82% of Georgians who don’t smoke are currently subsidizing those who do by $300 million per year.

I am naming my bill the Georgia Veteran Income Tax Exemption Bill.  Every impact of this bill will be positive for society.  The benefits are:

  • Eliminate the Georgia income tax on military retirement income for our veterans. This 6% savings on military income for our veterans will be a boon to veteran families and local economies.
  • Reduce youth smoking. Tobacco tax increases are one of the most effective ways to reduce youth smoking.  For every 10% increase in cigarette prices, youth smoking rates decline by five to seven percent and overall cigarette consumption declines by three to four percent.
  • Reduce adult smoking. An increase in excise taxes would be expected to reduce consumption.
  • Prevent smoking related deaths. According to the American Lung Association there are 10,546 smoking attributable deaths in Georgia annually.
  • Create long term healthcare savings for Georgia Medicaid. Georgia taxpayers currently spend $537 million per year on smoking related healthcare through Medicaid.  As smoking rates decline, so will Medicaid expenditures in future budget years.
  • Encourage veterans to live and work in Georgia. Currently, Alabama, Louisiana, and Mississippi exempt military retirement pay.  Of course, Florida, Tennessee, and Texas have no income tax at all.  This puts Georgia at a disadvantage on recruiting skilled and disciplined veterans to our state’s workforce.  There is no question that our workforce is our weakest link in terms of economic development.  Our industries are desperate for skilled employees who have the soft and hard skills necessary to succeed in today’s economy.  Our veterans are ideally suited with these skills.

 

Opponents will say that an increase in tobacco taxes will just force Georgians to travel to lower tax border states like South Carolina, Alabama, and Tennessee.  However, only three percent of Georgia smokers live in a border county.  Further, when Florida dramatically raised its tobacco tax from 34¢ to $1.34 per pack in 2009, no such shift occurred to benefit Georgia.  In fact, Georgia’s cigarette tax revenue declined in 2010!

Consistently, polls show that 71% of Georgia voters support a tobacco tax increase.  Indeed, voters of all income levels, political parties and educations favor an increase.  In fact, 50% of smokers themselves favor a tobacco tax increase.

 

Americans are blessed to live in a country that provides freedoms unparalleled in human history.  Interestingly, there are more Americans today than ever but we are protected by a much smaller military.  Indeed, the VA estimates that 22 million military veterans currently live in the US.  That represents only seven percent of our population.  Georgia is home to some 752,882 veterans. With this tax break for veterans, we will not only be treating them as they deserve for their service, but we will also be incentivizing veterans to live in Georgia.  Our employers need skilled and disciplined employees.  Veterans are ideally suited for many of these positions.

I ran for office to lead us to common sense and beneficial policies in Georgia.  It is my belief that this bill does that.

Rep. Petrea represents state House District 166, which includes portions of Bryan and Chatham counties.  He serves on the Health and Human Services, Human Relations and Aging, and Public Safety and Homeland Security committees.

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