The Atlanta Journal-Constitution features Georgia Budget and Policy Institute’s Executive Director Alan Essig’s op-ed on corporate tax breaks in Georgia.
As published in the Atlanta Journal-Constitution
The 2013 General Assembly is considering giving special tax treatment to encourage mobile home sales, help Georgia’s aircraft maintenance companies compete against their counterparts in other states, and lower the cost of zoo construction projects.
The tax breaks on the menu would diminish state revenues by tens of millions of dollars if all became law. That would be on top of the nearly $300 million in corporate tax credits for economic development Georgia now hands out each year.
This should raise eyebrows even if state budget cuts to education weren’t still causing teacher furloughs and layoffs across the state, while a lack of transportation funding results in long commutes for workers in Atlanta’s northern suburbs.
Supporters say their specific tax break is worthy because it will deliver jobs. Corporate beneficiaries or their lobbyists will often characterize their tax break as a potent job creator at committee hearings.
Lawmakers, who decide which tax break bills reach the governor’s desk, lack an independent method to conduct cost-benefit analyses to help them make informed choices about which breaks live up to their promises.
For example, the Legislature is considering extending a break on taxes paid by maintenance companies that work on aircraft based outside Georgia. Officials for Gulfstream, a maker of private jets on Georgia’s coast, say they need the tax break to be competitive against similar companies in other states.
A tax break for Gulfstream enjoys bipartisan support. No doubt it would cause some out-of-state repair business to continue coming to Georgia, resulting in more jobs. So, if we’re going to give up tax revenue we could use for education and transportation, how many jobs are we getting in return? How long will those workers be on the payroll?
Is Georgia getting more or better jobs with the aircraft tax break than it would for a proposed $30 million tax break program to encourage redevelopment of downtown districts? Would the state get more bang for the buck by approving the pending bill to cut the sales tax on mobile homes?
Legislation introduced this session proposes taking a small step toward increasing the public’s ability to understand the trade-offs the state makes when it approves a new tax break. Introduced this year in the Georgia House by state Rep. Chuck Martin, R-Alpharetta, House Bill 454 creates a path to independent research that lawmakers can use to decide whether to extend an existing tax break.
It’s a good start that should result in a public report that sheds more light on whether specific tax breaks help the economy or create jobs.
Gridlocked roads and an underfunded education system are cited by businesses as reasons they locate in neighboring states. We don’t know the cost of perpetuating those problems because the state diverts scarce resources to tax breaks that may not work.
1 thought on “Some tax breaks might not work”
Alan you are right to challenge the misguided policy of low taxes, abatements and incentives as a viable economic development policy for the state of Georgia. As a Certified Economic Developer (CEcD) I have helped many companies expand to Georgia and feel that Georgia can do better than a strategy of “our taxes are lower than the surrounding states”. Here are some suggestions: have a concerted and statewide vision that every community have an excellent public school system; cease giving incentives to companies addicted to cheap labor (cheap labor is very expensive); do not punish counties for having a per capita income above the state average by doing away with the Tier system; recognize that companies want a predictable tax policy and not one that is “negotiable”; and increase funding for science and technology programs in public education. If low taxes were the main ingredient for job creation then Glascock County (there really is a Glascock County) would not have an unemployment rate of 11.9%.