The Georgia Senate backed a plan Friday to offer more than $100 million in tax credits to investors in exchange for putting money into low-income communities and small businesses.
The tax credits would be split between a state version of the controversial “New Markets” federal tax credit program and Invest Georgia, a venture capital fund that is a top priority of Lt. Gov. Casey Cagle, the Senate’s president.
Supporters say House Bill 439, which passed 41-9 with overwhelming Republican support, will boost small businesses and startup tech firms. The measure now heads back to the House for its consideration. The General Assembly is scheduled to end its session Thursday.
Opponents say at least the “New Markets” portion of the bill bears too much resemblance to the old CAPCO investment programs in other states that wound up making huge profits for a few large capital firms, or CAPCOs, that handled the money.
And they criticized lawmakers' spending priorities, noting that the same General Assembly is forcing school districts to come up with extra money if they want to continue providing health insurance for part-time employees, such as bus drivers.
"This is about a $110 million cost to the taxpayers, and I'd a lot rather go ahead and give health insurance to our part-time school employees who are cooking meals and hauling our children on the buses," said Sen. Nan Orrock, D-Atlanta, who voted against the bill. "I thought we didn't have $110 million lying around. All of a sudden we can dig up this money and put it into speculative ventures that have been tried and turned back in some other states."
The tax credits would be given out over several years.
The General Assembly annually approves about $100 million or more in tax breaks to specific businesses, industries or individuals with the promise that the money will retain or create jobs. An Atlanta Journal-Constitution review in 2013 found that many beneficiaries of tax breaks failed to deliver.
Half of the tax credits would go to Invest Georgia, which was launched in 2013 with hopes that ponying up state dollars could attract enough venture capital to help transform Georgia into a tech hub.
The other half would go to the New Markets Tax Credit, which aims to funnel investment capital to low-income areas, both urban and rural. The program has its supporters who say it’s been a boost to local economies, and critics who call it a boon for banks, capital companies and deep-pocket investors who don’t need the government tax credits to invest.
Some of the same out-of-state companies that tried to get a CAPCO bill passed in 2011 are backing the Georgia New Markets bill, putting money into political races in Georgia and hiring some of the Capitol's top lobbyists.
One of those companies, Advantage Capital, said the New Markets concept has been successful in creating jobs in several states.
“Small businesses want to grow and create jobs but often lack the working capital needed to reach their full potential,” said N. Alyson Gabel, vice president of Advantage Capital Partners. “New Markets will expand business opportunities in Georgia’s low-income communities; create and retain jobs in those communities; and add new revenue to both state and local governments.”
Senate Insurance Chairman Charlie Bethel, R-Dalton, said if jobs are created and businesses grow, the state could take in more in revenue than it is losing by handing out tax breaks.
But the left-leaning Georgia Budget and Policy Institute said the complex financing process would makes it hard for the state to monitor and evaluate whether it actually works. One Arkansas official reported having trouble tracking the money, and a bill in that state was filed to kill the New Markets program. Programs in other states have been discontinued.
The state has traditionally had a poor track record of investigating whether the tax breaks lawmakers dole out boost businesses and jobs.
Bethel said the programs in HB 439 will have to make reports on their investments.
“If we fall short, if we find this is not creating jobs …. we can stop it,” Bethel said.
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