Economists agree: Tax amendment means jobs

If you think getting Republicans and Democrats to agree is difficult, try bringing partisans of Georgia Tech and the University of Georgia together — especially when the issue is a contest that takes place in November.

But before the schools’ football teams renew their “Clean, Old-Fashioned Hate” rivalry, some of their professors will be standing on the same side come Election Day.

That’s the day Georgia voters will decide whether to amend the state’s constitution to cap the individual income-tax rate at its current 6 percent. This week, the person behind that initiative, Sen. David Shafer of Duluth, released a list of 17 economists — including three Bulldogs and one Yellow Jacket — who agree the change would give our state “a competitive advantage in attracting new jobs and businesses and in persuading existing businesses to expand.”

A number of people, particularly those who want to see tax rates fall, have questioned whether the amendment is worthwhile or just a fig leaf for legislative inaction. I agree it would be better if we not only capped the rate constitutionally but lowered it. So did the economists, representing 10 of of our state’s colleges and universities in all, who signed Shafer’s statement.

But they also agreed that, in the meantime, the amendment “provides a large and important measure of long-run certainty in Georgia’s business environment.” Why?

“I think we know for sure that … increased risk assessment really holds down investment activity, especially when you’re going state to state,” says Christine Ries, professor of economics at Georgia Tech. “One of the risk assessment problems is political risk.

“Companies do this all the time, (judging) whether a particular political climate is inherent in a state or is going to change over time. Right now, Georgia is seen as a fiscally conservative state, and I don’t think most analysts are looking at it and saying Georgia might turn around and change tomorrow. … But anything that makes the public policy more reliable is going to lower the risk assessment and increase investment in the state or country.”

From Athens comes a similar note.

“Interestingly,” says Jeffrey Dorfman, professor of agricultural and applied economics at UGA, “I had done some research on how communities can attract jobs. And we found that sticking to your plans is pretty much the best thing you can do.

“It’s the credibility thing: If businesses feel like they can trust you, then they’re more likely to create jobs in your community. So this cap signals to businesses, we promise we’re not going to become New York or California or Illinois. We’re going to stay a good place to do business.”

Who are the expansions that result from such certainty most likely to benefit? Middle- to lower-income workers.

“In the other states that we look at, when you do pro-growth tax reform, the kinds of jobs that get created are $30,000-a-year jobs,” says Ries.

“If you look at the new jobs created, I suppose they’re the ones that get laid off first when the economy deteriorates, so you see them come back. You might hire some new McDonald’s restaurant workers, but by and large you’re going to have (employers) … create a whole new position. Not an entry-level position, but the kind you need when you grow.”

That’s good news for anyone who has lost such a job or aspires to one as the next rung on the economic ladder — whichever team they might root for on Saturdays.

About the Author