Gwinnett County and its cities are considering a new 1 percent energy excise tax on manufacturers to offset money lost from a tax break approved by the legislature earlier this year.
State lawmakers eliminated most sales taxes on energy used by manufacturers to make Georgia more appealing to prospective companies. The tax break will be phased in over four years beginning in 2013.
Advocates say the tax break will create manufacturing jobs. But it also will cost state and local governments millions of dollars in lost revenue at a time when budgets are already tight.
Lawmakers allowed local governments to offset the loss of the sales tax revenue by imposing a new energy excise tax on manufacturers. Local officials across the state now must decide whether to impose the new tax.
Cobb County officials already have decided against it. DeKalb and Fulton officials haven’t made a decision. Gwinnett officials must decide in the next few weeks whether to impose a new 1 percent energy excise tax beginning next year.
“(Gwinnett County is) crazy if they don’t,” Dacula Mayor Jimmy Wilbanks said after a briefing on the issue Tuesday. “And every city would be crazy not to join in.”
Manufacturers hope they won’t. Roy Bowen, president of the Georgia Association of Manufacturers, said counties that impose the new tax will be at a competitive disadvantage when it comes to attracting jobs.
“You might as well put out a sign that says, `business not welcome,’” Bowen said.
The tax break and offsetting tax increase would not affect most Gwinnett taxpayers, who will continue to pay a 6 percent sales tax – 4 percent to the state, 1 percent to local schools and 1 percent for road construction and other capital projects that is split among the county and its cities.
But under the new state law, Gwinnett manufacturers would see their sales tax on energy use fall from 6 percent to 1 percent. They would still pay the tax for local schools. Tax rates for manufacturers elsewhere in Georgia would depend on existing local sales tax rates in those jurisdictions.
The state Department of Audits and Accounts estimated the tax break would cost state government $18 million next year and $94.3 million in 2015. It did not estimate the cost to local governments collecting sales taxes.
Gwinnett County Commission Chairwoman Charlotte Nash said she doesn’t know how many county manufacturers would be affected and how much revenue local governments in Gwinnett would lose.
“Is it $2 million or $10 million?” she told local government officials at Tuesday’s briefing. “We could probably absorb $500,000. But $2 million starts sounding like real money.”
Lawmakers gave local governments the option of offsetting the tax break by imposing a new tax on energy used by manufacturers. Like the tax break, the new tax would be phased in over four years. Gwinnett County officials say it would replace revenue lost to the sales tax break and would not generate more revenue.
Even if local governments in Gwinnett impose the new tax, manufacturers would still see their tax rate on energy use fall from 6 percent to 2 percent. But Bowen predicted counties that impose the tax will have a harder time attracting jobs than those that don’t impose it. He thinks local governments should wait and see how much revenue they lose before imposing it.
“The risk is far greater than any potential revenue reward,” he said.
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