A proposed new tax credit program that benefits insurance companies would cost Georgia an estimated $139 million in lost revenue by 2023. The credit is part of a complicated finance program designed to create investment in low-income communities. But the experiences of other states offer cautionary tales that should give Georgia lawmakers pause before they move forward with legislation proposed in the House.
The tax credits drains as much as $28.8 million a year from the state budget before reaching $139 million total in eight years, according to a new analysis by the Georgia Budget and Policy Institute.
House Bill 439 is a hybrid of the federal New Markets Tax Credit, which some states copy, and a controversial state subsidy for insurance companies called CAPCO, which Georgia repeatedly rejected in the past. The latest Georgia legislation borrows the “new markets” name and shares some of the same components as the federal program, but it also proposes a complicated funding scheme involving state insurance companies. As with CAPCO, the legislation makes the new tax credit available to insurance companies, but not individual taxpayers.
A few things not to like about HB 439:
- The complex apparatus designed to direct investment to low-income communities in exchange for the tax credits lacks accountability to document it delivered desired results. That verification problem caused other states to scrap experiments with similar programs.
- Only insurance companies qualify for the tax credits, with no rhyme or reason for Georgia to give preferential treatment to one industry over individuals or other businesses.
- Claims of job creation vary wildly in some versions of the program used by other states. In Missouri the private sector estimated 6,000 new jobs resulted from a $120 million investment spurred by tax credits. State officials determined the real number was 823 new jobs.
Lawmakers can use many available tools to boost families and businesses in low-income communities, like fully funding education, supporting rural hospitals or enacting an Earned Income Tax Credit. But the new tax credit threatens to drain millions of dollars from the state budget in coming years, just as Georgia tries to figure out ways to pay for pressing needs like transportation.
HB 439 is an unfortunate distraction from constructive conversations policy makers could have to move forward with real solutions to Georgia’s challenges.