State GOP’s tax package aims for jobs

State House and Senate Republicans unveiled a package of tax credits and cuts Wednesday that they say will help create and maintain jobs across Georgia.

Included in the legislation, House Bills 481 and 482, is a $2,400 income tax credit for each unemployed person that businesses hire before July 2010 and keep on the job for at least 24 months.

The biggest, long-term change would be a reduction and eventual elimination of the state’s 6 percent corporate income tax, beginning in 2012.

In good years, the tax brings in up to $1 billion in revenue. The state is expected to reap only $600 million from the tax in fiscal 2010, which begins July 1.

The package would have limited impact on the state budget in the upcoming year. That’s because the tax breaks either wouldn’t be paid out immediately or because the money is not coming from the state general fund. Lawmakers are dealing with a $2.6 billion shortfall because of the recession.

Supporters said most of the package would benefit businesses long term, and the aim is to set the stage for economic recovery.

“True economic recovery comes through the creation of new jobs, not by work created through government programs,” said Rep. Tom Graves (R-Ranger).

Under the package:

> Employers would get a $500 credit toward their unemployment insurance taxes for each unemployed person they hired. That assistance would be available until July 2010. Unemployment insurance taxes are paid into a fund separate from the state budget.

> Business wouldn’t have to pay filing fees to register with the secretary of state’s office for a year.

> The state would eliminate two business taxes, the inventory tax and the sales tax deposit.

> Beginning in 2012, corporate income taxes would be reduced by half a percentage point each year over 12 years.

Graves was joined at the news conference announcing the tax breaks by leaders of the House and Senate, who promised to back the package. Business lobbyists also attended.

“This is a bold agenda, but it’s also a common-sense agenda,” said House Majority Leader Jerry Keen (R-St. Simons Island).

The Georgia chapter of the National Federation of Independent Business and the Georgia Chamber of Commerce quickly praised the proposal.

Kelly McCutchen, executive vice president of the Georgia Public Policy Foundation, said there is a limit to what state government can do to stimulate the economy.

But he said eliminating the corporate income tax will help midsize businesses and some of the tax credits could “incentivize” companies to hire the unemployed.

“This [package] is a sound attempt at doing some things on the margins and will help people who are unemployed,” he said. “The problem right now is uncertainty. Businesses are uncertain. Anything that can tip them into action will help.”

Economist Dmitry Shishkin said the proposals hearkened back to Reagan-era tax cutting.

“Apparently, the members of the Georgia General Assembly are reaching for a different toolbox of fiscal policy instruments than the rest of the country: Rather than boosting up government expenditures, the Legislature is choosing to rely on tax cuts,” said Shishkin, an assistant economics professor at Georgia Gwinnett College.

Economist Robert Lynch of Washington College said the idea of rewarding companies that hire the unemployed has potential, but the details would have to be just right.

If companies are hiring anyway and are enticed by the new law to pick unemployed people, “then it wouldn’t change how many jobs were created, it would only change who gets the jobs,” said Lynch.

“You are giving taxpayer money to things that would have happened anyway.”

Some parts of the package, such as the elimination of the inventory tax and killing the corporate income tax, aren’t new, having been sought by lawmakers for years.

Also Wednesday, Perdue said that House Ways and Means Committee Chairman Larry O’Neal (R-Bonaire) has introduced a series of changes in the state’s Business Expansions Support Act. Without providing details, the governor’s office issued a release in which he said he is proposing revisions to a number of corporate tax credits, including those for retraining workers, spending money on research and development and increasing imports through Georgia ports.

The legislation “tweaks” inducements that Georgia now offers to new and expanding companies, said Alison Tyrer, spokeswoman for the Georgia Department of Economic Development.

Perdue’s tax breaks could ultimately take $15 million from state coffers each of the next five years. But it’s doubtful the incentives will be fully utilized, she said.

Staff writers Dan Chapman and Michael E. Kanell contributed to this article.

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