Legislation would check effectiveness of tax breaks

January 29, 2010

In addition to the national economic recession, another contributing factor in Georgia's state budget deficit is the hundreds of millions of dollars that have been foregone through a number of special interest tax cuts and exemptions that have been implemented over the past several years. On Jan. 25, a House of Representatives subcommittee moved forward with legislation that would evaluate those tax breaks' impact on the budget and their success in achieving their intended goals.

SB 206, which was approved by the Senate last year, would require the state Office of Planning and Budget to review the tax cuts, credits and exemptions to help determine whether they should remain in effect or be repealed. Many of the tax breaks were adopted in the name of job creation, but no studies have been published or made available to lawmakers as to their effectiveness in serving that purpose. SB 206 now goes to the full House Appropriations Committee for its consideration.

While that legislation moved forward, another package of proposed business tax breaks is scheduled to be introduced in the House in the coming week. The provisions of HB 1023 and HB 1024 would purportedly spur the creation of startup businesses and, in turn, generate new jobs. The legislation proposes waiving state business fees for starting a new business, income tax credits, unemployment insurance tax credits, elimination of the net worth or intangible tax, a 50 percent reduction in the capital gains tax and a phase- out of the sales tax deposit required of small businesses.

Similar legislation, HB 481, was adopted in 2009 but was subsequently vetoed by Gov. Perdue because of its estimated $1.2 billion on the state budget.

House Adopts Rule Changes: A series of rule changes in the House of Representatives, proposed by new Speaker David Ralston, earned unanimous approval Jan. 28. HR 1168 eliminates the infamous hawk system, which gave certain Republican legislators the power to vote on any committee and change the outcome of legislation at the whim of the previous Speaker. The new rules also reduce the power of the Rules Committee to rewrite legislation and eliminate the previous ban on news media access to the House floor.

Legislators Furloughed: Due to the state's budget crisis, our public school educators and other state employees have had to take unpaid furlough days as a cost-saving measure. On Tuesday, a plan was announced for members of the General Assembly to take additional furlough days, which would save the state an estimated $2.7 million. I support this plan because as elected officials we must lead by example. We are not and should not be excused from giving up part of our legislative salaries to help in the very difficult task of balancing this year's budget. By the end of fiscal year 2010, lawmakers will have taken 11 unpaid furlough days, including one day a month from August through December last year. Other state agencies have each taken between three and 12 furlough days.

School Funding Assistance: Due to state budget cuts over the past eight years, many of our local school districts across the state have had to increase class sizes or raise local property taxes, or both. In an effort to assist our local schools during these tight economic times, HB 1020 and HR 1203 been introduced to enable boards of education to use special project local option sales tax (E-SPLOST) revenues for maintenance and operating costs, as well as capital expenditures. Currently, our schools are restricted to using E- SPLOST funds only for construction and other capital projects. The special tax would continue to be levied only after voter approval in a local referendum.