Opinion: A tax credit to help Ga.’s small businesses

Expanding the Earned Income Tax Credit will boost the small business ecosystem and encourage entrepreneurship

Georgia policymakers often tout magazine polls that rank Georgia as the number-one state in which to do business. Unfortunately, small employers and their employees have been among those hit hardest by the ongoing pandemic.

In the early stages of the COVID-19 crisis, many small businesses temporarily closed their doors, and not all of them were fortunate enough to reopen. Those that could reopen their doors faced a market plagued by uncertainty and unprecedented challenges like record revenue losses, staff shortages, and supply chain issues.

We continue to see new data chronicling the immense impact that the pandemic has had on small businesses in Georgia. Fortunately, the American Rescue Plan Act (ARP) provided Georgia with $4.7 billion in federal emergency aid meant to address the effects of COVID-19. Those funds could generate a meaningful recovery by funding a state Earned Income Tax Credit or EITC, known across the state as a Georgia Work Credit (GWC).

Credit: Courtesy photo

Credit: Courtesy photo

An EITC would provide immediate relief to small business owners and their employees and could be funded through the end of 2024 under federal guidelines. Further, lawmakers can also enact a permanent program to support hardworking Georgians with low- to moderate-income who work for or own a small business, significantly boosting their pay, as 30 states across the nation have done.

Credit: contributed

Credit: contributed

Most small businesses are solo enterprises in Georgia. Many of them are still facing extensive challenges nearly two years into the COVID-19 economic crisis and expanding the EITC would provide them with much-needed relief. In a poll of 300 of Georgia’s small businesses, Small Business Majority found that nearly 6 in 10 small business owners support establishing an EITC program to benefit employees with low incomes and self-employed business owners. Amy Bielawski, the owner of Hare-Brained Productions in Tucker, is currently uninsured and has preexisting conditions. She supports a state EITC not only because it will help her grow her business while also investing back into her community but also because it would allow her to afford health insurance.

Amy is among the thousands of Georgia small business owners who experienced hardship due to the COVID-19 pandemic, and she’s looking for a solution to long-term recovery. The EITC will foster purposeful recovery and bolster economic security by spurring innovation and services.

Small business owners see an EITC as a step in the right direction. The majority of small employers are low- to moderate-income sole enterprises and entrepreneurs with a median income of just $25,064 at their own unincorporated firm. An EITC would directly benefit entrepreneurs and could level the playing field for small employers with limited resources by increasing take-home pay as they work to grow their revenues. By creating a Georgia Work Credit, lawmakers can deliver meaningful relief to more than 3.5 million Georgians who earn up to $55,000 per year, including the 600,000 workers now eligible because the ARP expanded the federal credit.

Data suggest that an EITC at 10 percent of the federal level would provide more than $300 million to support local Georgia economies annually. EITC funds sent as direct payments would be used to purchase essential goods and services and would stimulate local economies as community members are able to better afford child care, shop at their local corner store and otherwise frequent their neighborhood businesses. In turn, this would create a ripple effect where small businesses could grow, advancing economic opportunity for even more families. The direct payments would be similar to stimulus checks from the federal government but offer a more targeted approach to deliver the strongest benefit possible. Georgians who qualify would receive a check or bank deposit that they could then use to bolster small businesses within their communities.

Lawmakers have an opportunity this session to implement a program that will have a longstanding benefit to Georgia’s local economies. The Georgia Work Credit has bipartisan support, and three bills supporting the creation of an EITC have been introduced within the General Assembly. Not only would an EITC provide relief to small businesses, but it could help their employee’s families pay their medical bills, catch up on their rent or pay for child care.

An EITC strongly benefits families and would direct millions in resources to Georgia’s local economies. By taking action on an EITC, lawmakers would help many small businesses with low to moderate incomes recover and make a tremendous impact in their local communities.

Rachel Shanklin is Georgia outreach manager for Small Business Majority. Danny Kanso is senior policy analyst at the Georgia Budget and Policy Institute.