Surprise tax cut, but no transportation deal

Lawmakers approved a surprise tax cut for investors Friday, but failed for a second straight year to reach a deal on new funding for transportation.

Earlier in the day, lawmakers passed a slimmed-down $18.6 billion budget for the upcoming fiscal year and gave final passage to a bill giving people who want to become parents the ability to adopt human embryos.

As is typical on the 40th and final day of the session, lawmakers and lobbyists spent Friday scurrying to get deals done before the clock struck midnight.

Once again House and Senate leaders spent much of the last day battling over legislation to create a new funding plan for road and other transportation projects. The House favored offering voters a statewide 1-cent sales tax for transportation projects, and the Senate wanted to offer the tax on a region-by-region basis. Supporters said the money is needed to help relieve Atlanta’s traffic gridlock.

“At this point, we want a bill,” said Chick Krautler, director of the Atlanta Regional Commission. “The important thing now is to get something passed. Now. This year.”

But it apparently wasn’t to be. An 11 p.m. meeting of House and Senate negotiators ended with House members walking out without a deal.

An hour earlier, the Senate gave final passage to a bill proposed by Gov. Sonny Perdue to re-write who controls the state’s $2 billion transportation budget.

The bill would create a director of planning for the Department of Transportation who would answer only to the governor. It also would give the Legislature more power over which road projects get done.

Perdue called the transportation tax failure “disappointing.”

“I think the case has been made for needing more funding in this state,” he said. “Hopefully we can begin right after this session ends to formulate a plan we can get an agreement on between the House and the Senate … and make the case to the people of Georgia.”

The investor tax break was tacked on to a popular bill originally aimed at giving breaks to businesses that hire the unemployed.

The legislation, House Bill 481, gives $2,400 tax credits to employers who hire and retain the unemployed.

But Republican negotiators added an amendment cutting long-term capital gains taxes by 25 percent for gains in 2010 and by 50 percent after that.

Capital gains are profits from the sale of stocks, bonds, other investments and things like vacation real estate.

Perdue raised questions about the capital gains tax cut. He would have to sign it to become law.

“As Republicans, we don’t like taxes,” Perdue said. “But when you’re in a constrained situation in a balanced budget state with the challenges we have now, I will have to look at it in the light of that. There may be a better day to look at that in the future.”

Critics said the tax break would cost the state $340 million a year and would mostly benefit the highest wage earners in Georgia.

“This helps the rich and the super-rich,” said Sen. Nan Orrock (D-Atlanta). “This is fiscal irresponsibility at its highest.”

However Rep. Tom Graves (R-Ranger) said the tax break would encourage savings and investments, and that the bill would create jobs. Senate Majority Leader Chip Rogers (R-Woodstock) said at the federal level, the economy has traditionally improved when capital gains taxes are reduced because it frees up money to invest.

Orrock said the bill would “blow a hole” in the state budget.

“This is not a jobs builder it’s a jobs loser and guess who’s going to benefit?” she said.

The budget for fiscal 2010, which begins July 1, is smaller than this year’s because the recession is reducing tax collections. Legislators used more than $1.3 billion in federal stimulus money to balance it.

It avoids new health insurance premium increases for 225,000 teachers and state employees. And it has $1.2 billion in borrowing for construction projects, mostly for schools and libraries.

It includes more than $1 billion in spending cuts as well.

“There are some bright spots, but there is a lot of pain in this budget,” said Senate Appropriations Chairman Jack Hill (R-Reidsville).

Staff writers Aaron Gould Sheinin, Mary Lou Pickel and Ariel Hart contributed to this article.