You could forgive Atlanta Community Food Bank staffers for holding their breath until Gov. Nathan Deal put his signature Monday on a tax break designed for them. After all, it was only a year ago he vetoed a similar measure after approving a tax break for customers of luxury jet makers such as Gulfstream.
Deal on Monday reupped the relatively tiny tax break for food banks as part of a broader package that helps video game producers, back-to-school shoppers, makers of energy-efficient products and mega construction projects such as the new Falcons and Braves stadiums.
The food bank credit will save those nonprofits about $2.6 million over two years, while the others tacked onto the bill will cost state and local governments and save some taxpayers more than $240 million over that period. Overall, the tax breaks that Deal has signed or is expected to sign this month will cost state and local governments nearly $500 million over the next five years, according to the Georgia Budget and Policy Institute.
Those tax breaks make it harder for lawmakers to cut or phase out state income taxes for all residents, something some powerful Republican lawmakers have long championed. And critics say the annual parade of tax cuts closes the door on a more comprehensive tax overhaul.
“This haphazard way of doing tax reform is not very effective,” said Kelly McCutchen, the president of the free-market Georgia Public Policy Foundation. “I certainly would rather us undertake comprehensive tax reform so we didn’t have to resort to special tax breaks.”
Deal said Monday that the state sometimes has to pick favorites in hopes of gaining a strategic advantage over competitor states. He compared the new tax break for video game makers to incentives for the movie industry that helped launch Georgia as a filmmaking mecca in recent years.
“It’s a matter of trying to stimulate industries we know have positive economic effects on the state,” the governor said. “Sometimes you have to do that in order to get them to put down the kind of roots that you want.”
Video games and mega projects
The measure Deal signed, House Bill 958, became a catch-all for special-interest tax breaks as the legislative session barreled to an end last month.
It includes a campaign-friendly extension of a back-to-school sales tax holiday, which would run Aug. 1-2. During those two days, consumers wouldn’t have to pay sales taxes on clothes, school supplies, shoes, and some computers and software. A separate holiday would eliminate the state sales tax on energy-efficient items Oct. 2-4.
Another piece involves the extension of a sales tax break for construction materials for projects deemed to be of "regional significance" that could help the Braves and Falcons save millions as they build new stadiums. There's also a $25 million tax break for video game developers, a piece Deal signed at a Georgia Tech laboratory.
Blair MacIntyre, a Georgia Tech computing professor who specializes in creating innovative video game design, said more than half of his students bolt for places such as San Francisco and Seattle after they graduate because there aren't enough jobs in Georgia.
“This can only help keep those students in the state,” McIntyre said. “The benefit of the video game industry is that it doesn’t pack up after one production. They stay and plant roots here. And Georgia Tech students are predisposed to stay here. They would love to be here if there are jobs.”
The tax breaks for the Falcons and Braves could save their billionaire owners tens of millions of dollars in construction equipment. It would be up to the governor and the state economic development commissioner, whom Deal appoints, to decide whether to grant each.
Falcons owner Arthur Blank has contributed $14,400 to Deal’s gubernatorial campaigns. The Atlanta Braves have given $5,000 to Deal campaigns.
Deal said the two teams were no “absolute certainty” for the tax cuts, but he noted that the program is designed for ambitious region-changing projects.
A food bank debate
It’s the food bank tax break, though, that’s caused the most head-scratching. The governor’s veto of that legislation last year brought a rebuke from critics who thought he was playing political favorites with tax breaks.
Deal said in his veto statement that he nixed the food bank program because it hadn’t been vetted by a panel of lobbyists and business leaders he drafted to review tax breaks. It came days after he signed a more expensive tax break to help the customers of luxury jet makers that wasn’t vetted by the same panel.
“You know, you would always like to try to keep legislation as clean as possible. But that’s not always possible in a legislative process,” Deal said. “I do think there are other parts of the bill that are beneficial. They may not have as high priority, but I think they will stimulate our economy.”
Some analysts, though, question whether the package will leave a broader imprint on the economy. McCutchen, from the Georgia Public Policy Foundation, said the video game break could help jump-start an industry that creates high-paying jobs, but he said sales tax holidays are generally ineffective as the dates merely shift when parents shop for items they would buy anyway.
He and other conservatives say comprehensive reform — such as eliminating the state income tax — could also attract those kinds of businesses and entrepreneurs to the state.
Wesley Tharpe of the left-leaning Georgia Budget and Policy Institute, which has been adding up the cost of the state tax breaks for years, said this session produced a “business-as-usual” outcome despite hopes of tighter limits on election-year cuts.
“It’s largely what we have come to expect in Georgia the last few years,” said Tharpe, a tax policy analyst. “They didn’t really do much to confront the real challenges facing the tax system.”
More tax proposals await Deal’s signature. He has already signed a tax break backed by UPS that gives businesses a chance to earn tax credits for buying vehicles that run on alternative fuels. He’s also considering making permanent the Gulfstream tax break — which is projected to cost state and local governments about $142 million between 2016 and 2019.
For staffers at the Atlanta Community Food Bank, though, Monday was a time to celebrate. Bill Bolling, the nonprofit’s executive director, was visibly relieved after the bill signing. He was one of the measure’s biggest champions and has long said the tax break could help food banks provide at least 1 million additional meals.
“I feel very good that we got it signed, but I still see no reason that we lost it in the first place,” Bolling said. “This makes all the sense in the world. To make food banks pay taxes on food for the hungry made no sense.”
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