Georgia gives out hundreds of millions of dollars in business tax breaks every year with little rhyme or reason. The state needs to create an unbiased and fact-based system to weigh the costs and benefits of tax incentives and exemptions. Gov. Nathan Deal’s ongoing Georgia Competitiveness Initiative is not set up to meet those objective standards.
The initiative, a joint effort of state government and the Georgia Chamber of Commerce, is led by about two dozen people from across the state, nearly all representing for-profit corporate interests. Their charge is to recommend ways to strengthen the business climate in Georgia. Members of the initiative met in Dalton and Tifton this month to hear presentations from industry representatives angling for state tax breaks. The members will deliver recommendations to the governor to help him choose which tax breaks to support.
It is fine for chamber members to push for tax breaks they think will strengthen the state’s economy. But it is clearly a conflict when the system gives business leaders so much clout in a decision-making process that relies on playing hunches.
Georgia needs a review process based on facts and impartial analysis, not one that rests largely on the testimony of industry advocates and lobbyists. An arms-length review should answer such questions as: How many jobs will be filled by Georgians versus transplants? Will tax breaks generate new jobs, or just subsidize existing plans that would have taken place without them? And how many jobs would be lost from budget cuts required to pay for lost tax revenue?
These questions demand detailed analysis by qualified experts, not just guesswork by parties that may stand to benefit from the tax breaks they recommend.
There is a better way. Rhode Island recently passed legislation that provides a tax-break evaluation model for Georgia to adopt.
Rhode Island requires reviews every three years of all tax-subsidy programs by the state’s Office of Revenue Analysis. The reviews measure the benefit and cost of each subsidy, including its impact on the state’s overall budget and economy. The governor’s budget proposal then must make a recommendation to continue the tax break, make changes or end the program. Budget hearings in the legislature provide a forum to discuss and compare the results and costs of tax breaks alongside other types of state spending.
The Pew Center on the States says Rhode Island is leading the way for states to evaluate economic subsidies. Georgia should follow that lead.
Georgia’s tax code is past due for a thorough review. State taxpayers effectively spend nearly $300 million each year on tax credits for economic development with only anecdotal evidence of a return. Delegating authority to an unelected group of executives representing corporate interests is the wrong answer to the problem. Proposed tax breaks should be subject to accountable, transparent, fact-based examination. It is a better way for the state to do business.
Alan Essig is executive director of the Georgia Budget and Policy Institute.
