Transportation Reforms, Questionable Tax Breaks Drive This Year’s Tax Agenda

wes blogA package of measures designed to boost funding for Georgia’s ailing transportation network is the biggest tax item to pass this year’s General Assembly, but lawmakers also approved several other tax bills that in some cases carry sizable revenue costs. Legislators gave their approval to 10 tax bills besides the transportation package, House Bill 170. Though a few of the non-transportation measures could eventually demonstrate some merit, together they threaten to eat into Georgia’s future tax revenues. That will limit lawmakers’ ability to meet the state’s funding obligations on education, health care and other core needs.

Those are the findings of “Adding Up the Fiscal Notes: 2015 Session Recap,” the Georgia Budget and Policy Institute’s annual accounting of tax bills lawmakers approved before they adjourned. Here are some takeaways, and make sure to check out the full four-page report for more details.

The transportation bill is a mostly sensible package of tax reforms designed to raise considerable revenue. If the governor signs the legislation, the plan should generate about $900 million in additional money for Georgia’s roads and bridges in the first year. That total includes $170 million shifted over from Georgia’s general fund each year, but the remainder consists of new revenues. State revenues will likely rise above $1 billion after the first year or two, which is the funding target most observers view as the minimum Georgia needs.

State legislators deserve some praise for addressing one of Georgia’s most pressing policy challenges with increased tax revenues. But the General Assembly’s 2015 record on tax issues outside of the transportation bill is more mixed.

Legislators approved 10 additional tax bills, which combine for a significant budget drain. The 10 non-transportation tax measures would cost the state treasury an estimated $176 million over the next five years, if Gov. Nathan Deal signs off on them all. The total cost over the next eight fiscal years is an estimated $271 million, due to long-term costs for three of the proposals. One is a collection of housekeeping measures Georgia enacts each year to conform to annual changes in federal tax law. But the other measures create or extend tax breaks for the benefit of a few industries or specific policy goals. The non-transportation tax bills include a generous income tax credit for commercial developers that renovate historic properties, a dubious tax break for insurance companies and an array of smaller benefits.

Not all of these are bad policy per se, but they will drain state coffers of revenue at a time when lawmakers struggle to adequately fund core responsibilities, including schools and rural hospitals. Georgia already spends hundreds of millions each year on tax breaks for the private sector, and it’s often unclear exactly what taxpayers get in return. So before signing off on a new batch, the governor should weigh the costs and benefits of each of the new tax breaks. And if these bills all become law, then legislators should keep a close eye on their future performance. Tax breaks that deliver less than expected can be revised, reduced or killed.

 

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