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Tax breaks for Georgia businesses bypass state Constitution

In most states, tax breaks for businesses must be approved by elected city councils or county commissions.

That’s not the case in Georgia. 

Georgia is part of a small group — along with New Mexico, North Carolina, Tennessee and Virginia — that relies on nonprofit economic development agencies to pass along property tax incentives for business expansion or relocation, according to Good Jobs First, a Washington-based accountability organization.

Georgia is different from most of the rest of the country because the state Constitution requires uniform taxation. Local government officials are prohibited from awarding special tax discounts to businesses.

To get around that restriction, Georgia empowers unelected economic development authorities to use their nonprofit, tax-free status to give property tax breaks to businesses of their choosing.

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“Inherently these things (development authorities) are end-runs on fairness and all that implies,” said Greg Leroy, executive director for Good Jobs First. “It would be better to have it in a more straight-up situation.”

When elected officials control incentives, the public can hold their local leaders directly accountable, said Kenneth Poole, CEO of the Center for Regional Economic Competitiveness, an Arlington, Va.-based organization that works with governments to develop economic development strategies. 

But the system used in Georgia also has benefits.

“You’re less likely to get charges that decisions are being made for political reasons” in states with development authorities, Poole said. “I don’t know if there’s one right way or one wrong way” to decide on tax breaks.

Development authorities, made up of residents appointed by local elected officials, have awarded about $500 million in Cobb, DeKalb, Fulton and Gwinnett counties and the city of Atlanta over the last three years, according to an analysis by The Atlanta Journal-Constitution.

Please read the AJC’s full report about the costs of tax breaks on MyAJC.com

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