Georgia lawmakers vowed to cut tax breaks. They approved more instead.
Handing out hundreds of millions of dollars in tax breaks is nothing new for Georgia lawmakers. But if you listened to leaders in the state Senate, you could be forgiven for thinking this year might be different.
Republican leaders, many of them seeking higher office, spent months pledging to eliminate billions of dollars of tax breaks they dubbed “corporate welfare” to help pay for their ambitious plan to end the state income tax for most Georgians.
Instead, lawmakers approved more than $3 in new tax breaks for every $1 in tax breaks they voted to eliminate in the most recent legislative session, an analysis by The Atlanta Journal-Constitution has found.
The new or expanded tax breaks include hundreds of millions of dollars to benefit the timber and forestry industries, private school scholarship programs and other interests.
Lawmakers also approved billions of dollars in new state income tax cuts for ordinary Georgians — without eliminating big tax breaks to offset the lost revenue. They couldn’t even muster the will to curtail tax breaks for unpopular data centers, which are expected to cost the state $2.5 billion this year.
Critics say lawmakers who set out trying to minimize the budget hit of big income tax cuts may have blown a bigger hole in the state budget instead.
“Ultimately, they decided to pass a multibillion-dollar (income tax) bill that doesn’t come near to paying for itself,” said Danny Kanso, a budget analyst for the liberal-leaning Georgia Budget and Policy Institute.
Lt. Gov. Burt Jones, who has made income tax relief a top priority, said in a statement to the AJC that legislators made progress this year.
“The General Assembly took the first of many steps ahead in trimming back or eliminating corporate welfare while cutting income taxes for every Georgia family and business again this year,” Jones said. “I also gladly supported targeted tax breaks to help people in rural Georgia still recovering from Hurricane Helene and to expand Georgia’s school choice scholarship tax credit program, which are the right role for tax incentives.”
House Bill 463, the income tax cut, now awaits Gov. Brian Kemp’s signature. The governor has backed a more gradual approach to tax cuts and has not said whether he will sign Jones’ bill.
Big talk, small results
A state Senate committee spent months studying ways to eliminate the state’s individual income tax. That would be a tall order — it’s by far the state’s largest source of revenue and is expected to generate $15.7 billion this year. That’s 42% of state revenue.
Jones’ proposal, unveiled in February, amounted to a first step. It would have lowered tax rates and quadrupled the standard deduction, potentially eliminating the income tax for nearly two-thirds of Georgians. The Senate estimated Jones’ plan would cost the state $3 billion in lost revenue in fiscal year 2027 and $6 billion the following year.
To begin to cover that cost, Jones’ bill proposed eliminating about 30 income and sales tax breaks on everything from data centers and insurance companies to medical equipment. Senate leaders estimated that would generate some $2.8 billion in revenue the first year.
“Are we going to vote to allow corporate welfare and corporate subsidies to continue at the expense of families who are trying to pay for gas, groceries and childcare?” state Sen. Blake Tillery, a Republican who is also running for lieutenant governor, asked senators before they approved the measure.
A state analysis of the bill found eliminating the tax breaks would raise far less revenue than senators thought — about $689 million in the first year.
But the scaled-back income tax bill that ultimately passed the General Assembly eliminated only 13 tax breaks worth about $10.4 million in the first year, according to financial analyses by state officials. Over five years, the state would gain about $107.4 million by eliminating the breaks.
The analyses found eliminating five of the breaks would generate no money at all. For example, the bill eliminates a tax credit for teleworking expenses that expired in 2012. Others haven’t been used or aren’t expected to generate new revenue because the businesses that could claim them qualify for other tax breaks.
Nearly half the revenue generated comes from eliminating a single tax break: a sales tax exemption for boats sold by licensed dealers to out-of-state residents. That would generate about $51 million in revenue over five years.
Tillery, who chaired the income tax study committee and often spoke of eliminating corporate welfare, did not respond to requests for comment.
More breaks approved
The AJC analysis found lawmakers approved at least nine new or expanded tax breaks that will reduce state revenue. The largest ones include:
- House Bill 376 doubles the cap on an income tax credit for rehabilitating historic structures from $30 million a year to $60 million.
- House Bill 328 raises the cap on income tax credits for contributions to private school scholarship programs from $120 million to $150 million a year and raises the cap on a break for contributions to public school grant programs from $15 million to $25 million.
- Senate Bill 59 raises the aggregate cap on income tax credits for timber producers impacted by Hurricane Helene from $200 million to $250 million.
- House Bill 519 creates a jobs tax credit for businesses that hire veterans, those convicted of felonies and disadvantaged people such as recipients of food stamps, capped at $10 million per year.
Senate Finance Committee Chair Chuck Hufstetler, R-Rome, voted against some of the new or expanded tax breaks. He said he’d rather lower tax rates for everyone than give deals to special interests like data centers. And he noted studies that show some tax breaks don’t make financial sense for the state.
“Quite often, the studies say the business would do the same thing without the tax credit,” Hufstetler told the AJC after the Legislature adjourned last month. “We’re wasting our money.”
The AJC’s analysis found the new or expanded breaks would cost the state about $71 million in fiscal year 2027 and $363.5 million over five years.
But that analysis may significantly underestimate the cost of the new tax breaks. Some of the state financial estimates were for early versions of bills that became more generous in their final form.
For example, a state analysis of the scholarship bill examined an early version that raised the cap on contributions to private school scholarships to $140 million, not $150 million. And the early version did not include the expanded credit for contributions to public school grant programs.
Kanso, the budget analyst, said lawmakers’ desire to pass big income tax cuts and special interest tax breaks will come back to haunt them.
The effects may not be immediate. Georgia has accumulated massive budget reserves in recent years, which give the state a hefty financial cushion.
But Kemp and lawmakers have spent years returning that money to taxpayers through income tax rate cuts and one-time tax rebates. They also have suspended the state gas tax on several occasions — most recently in response to rising prices brought on by the Iran war. The latest 60-day gas-tax suspension is expected to cost up to $200 million a month, and no one will be surprised if Kemp renews it.
“You can’t fund all these special interest tax breaks and, at the same time, make these sweeping cuts to the foundation of our revenue system,” he said.
“Eventually, we will reach a point where these lawmakers need to make a choice,” Kanso said. “It may come sooner rather than later.”
About the Author
David Wickert writes about the state budget, finance and voting issues. Previously, he covered local government and politics in Gwinnett and Fulton counties. Before moving to Atlanta, he worked at newspapers in Illinois, Tennessee, Virginia and Washington.
