JOBS Act falls short?

By James Salzer

The Atlanta Journal-Constitution

A much-touted plan that Georgia legislative leaders said would spur job growth will probably have no immediate impact on the recession-wracked economy.

The “JOBS Act,” which won final passage in the General Assembly last week, would provide small unemployment tax breaks to businesses for hiring. But that would happen only if the federal government gives its approval and the state labor commissioner determines the unemployment trust fund has enough money to handle it. And the U.S. Department of Labor has already expressed doubts about the provision.

The bill would provide up to $9 million in tax credits over three years to investors who provide funding for certain small businesses. However, the investments that qualify wouldn’t begin until 2011 at the earliest.

The state would also cut in half its tax on long-term capital investments such as stocks and bonds, a move critics say will benefit mostly the wealthiest Georgians at a cost of $340 million to state coffers. Even that wouldn’t kick in until the state has built up its reserve fund, which has shrunk to almost nothing during the recession. That could take years.

Still, some lawmakers will tout the JOBS Act as they run for re-election this fall.

After the Senate approved the measure last week, Lt. Gov. Casey Cagle posted a message on Twitter: “Thrilled the Senate has passed the JOBS Act and sent it to governor for his signature! Important legislation for Georgians and businesses.”

The post came less than an hour after one of the bill’s prime backers, Senate Majority Leader Chip Rogers (R-Woodstock), acknowledged that it was a much less substantial package than legislative leaders had hoped for.

House Majority Leader Jerry Keen (R-St. Simons Island), who has promoted the bill for two years, said there is only so much the state can do to spur job growth. That’s particularly true when state lawmakers are pinching pennies to keep the government in the black because of a dramatic drop in revenue.

“We are trying to encourage job growth,” Keen said. “The fact is, the federal tax code has a far greater bearing on that than we can have.”

House Minority Leader DuBose Porter (D-Dublin), a candidate for governor, said the bill doesn’t live up to its name.

“Even though it’s called the JOBS bill, there is very little in there that would actually give incentives for jobs,” Porter said.

The JOBS Act was first unveiled with great fanfare in February 2009 when Republican leaders held a heavily covered press conference touting the package.

It was sponsored by then-state Rep. Tom Graves (R-Ranger), who recently resigned to run for Congress, and it had the backing of the biggest names in the General Assembly.

The package included $2,400 in tax credits for each worker hired and retained, a reduction and eventual elimination of the corporate income tax, a credit toward unemployment taxes for businesses that hired the unemployed, and the elimination of some other businesses taxes.

It overwhelmingly passed the General Assembly, but at the last minute Republican leaders tacked on a provision slashing the capital gains tax on long-term investments.

The original proposal was already going to cost the state — and save businesses —hundreds of millions of dollars in taxes. The capital gains tax cut made the bill even more expensive for a state already short of money.

Gov. Sonny Perdue raised questions about the last-minute deal and the cost of cutting the capital gains tax, and vetoed the entire JOBS package.

So Graves and Republican leaders tried again this year. However, the state’s financial picture had worsened, causing lawmakers to jettison costly provisions such as the $2,400 tax credit and the provision to eliminate corporate income taxes.

Perdue does not comment on whether he will sign legislation into law, so it’s unclear how he’ll handle this year’s JOBS Act.

Even though it’s been cut back, Graves still touts the JOBS Act on his Congressional campaign Web site. “The JOBS Act is exactly the shot in the arm we need and will put Georgians back to work,” he says on the site.

Business groups, like the Georgia Chamber of Commerce and the National Federation of Independent Business, supported the slimmed-down bill.

David Raynor, state director of the NFIB, said the investor tax credits will help some small businesses find capital to get started. Some businesses, he said, have had a hard time getting access to money over the past few years as banks tightened credit.

The chamber said North Carolina provides a 25 percent tax credit for start-up investors. Over the course of a decade, the program helped create over 600 new jobs per year in high-growth industries, with wages averaging nearly $60,000, the chamber said.

Rogers argues that reducing the capital gains tax will likewise put more money into the hands of investors, who will re-invest the money and create jobs.

Raynor said the unemployment tax credits would also help some businesses afford to hire the unemployed.

Still, Georgia Gwinnett College economist Dmitry Shishkin is skeptical the package will do much for the ailing economy. “There are more fundamental reasons that people hire (than tax breaks),” he said.

Perdue’s fiscal economist, Kenneth Heaghney, said much the same thing.

“In all of these, it’s unclear what the immediate benefit is or how much it will help,” he said. “Most firms hire on their perceived demand and need. The ability to get (tax) credits is not the determining factor.”

David Pennington, mayor of Dalton and founder of a local insurance business, said the JOBS bill won’t persuade him to add jobs.

“I’m not going to hire somebody for a tax credit,” said Pennington, who has eight employees. “If I’ve got something for them to do, I will (hire).

“Those people who were going to hire somebody anyway, they are going to hire them, but now they get the tax credit. It’s not going to incentivize anybody, for the most part.”

Pennington said the state needs to do something more far-reaching, such as eliminate taxes manufacturers pay on energy they use or reduce corporate income taxes on manufacturers.

But those moves would likely be expensive.

Sarah Beth Gehl, deputy director and tax policy analyst for the Georgia Budget and Policy Institute, said the original JOBS bill would have been so costly, it would have forced lawmakers to slash spending further.

“There is nothing they could have put in the bill that would have been a boon for jobs,” she said. “Perhaps they came to the realization that they couldn’t do tax policy like this with the current budget situation without cutting thousands of (state) jobs.”