Georgia lawmakers take fresh aim at special-interest tax breaks

Capitol lobbyists may be busy during the 2023 session as Georgia lawmakers take aim again at the billions of dollars in tax breaks the state gives out.

State audit reviews that came out late last year raised new questions about whether the state is getting its money’s worth from some of the tax breaks that lobbyists helped push through the General Assembly with the promise that they’d create jobs.

The reviews found that in some cases, most of the jobs credited to the state tax breaks would have been created even without the credits or exemptions.

During budget hearings last week, Sen. John Albers, R-Roswell, who has led the push to review the lengthy list of state tax credits and exemptions, said the breaks that were reviewed don’t provide enough benefit to the state to be left on the books.

In the Senate, some leaders say they’d like to use any savings to further reduce income taxes on Georgians.

“I am highly in favor of eliminating special-interest tax breaks to reduce taxes for everybody,” said Senate Appropriations Chairman Blake Tillery, R-Vidalia.

But House Ways and Means Chairman Shaw Blackmon, R-Bonaire, whose panel is where tax breaks commonly start, said lawmakers need to be careful not to eliminate incentives for businesses to create jobs.

“I think obviously we want to work with our leadership to make sure that Georgia is getting the best bang for the buck,” Blackmon said. “That doesn’t necessarily mean you eliminate all or parts of our credits or exemptions.

“Any knee-jerk reaction is going to have an impact on those businesses. We want to do everything we can to keep jobs here.”

The House and Senate passed legislation in 2021 that was a first step toward greater accountabilty: allowing the chairmen of the tax-writing committees to request reviews of a limited number of tax breaks each year.

Currently, such tax breaks — which cost the state billions of dollars in revenue each year — often occur after supporters provide testimony or data from industry lobbyists or other parties that would benefit from them. Those advocates typically tell lawmakers the tax break will create or save jobs, and legislators give the OK.

Businesses hire lobbyists specifically to get such tax breaks passed because they can mean millions of dollars to a company.

Many times tax breaks pass in the final hours of a legislative session, when lawmakers are taking hundreds of votes and have little time to review what they are voting on.

Eliminating or even cutting back on such tax breaks once they are approved is extremely difficult because each one has lobbyists pushing to keep them who maintain that they’ve created jobs or provided huge benefits to the state.

Credit: robert.andres@ajc.com

Credit: robert.andres@ajc.com

Senate Finance Chairman Chuck Hufstetler, R-Rome, last year sought to cap how much the state spends providing tax credits to the film industry at $900 million annually. Auditors say it is the state’s largest income tax credit and the most lucrative film incentive in the country. Supporters say it has created a booming film industry in Georgia, and it has broad backing from lawmakers from both parties.

Hufstetler also wanted to eliminate the ability of film companies to sell the credits. About 80% of the credits are sold by out-of-state film companies — who owe little in the way of state taxes — to people or companies with big state tax bills, according to state auditors.

His idea, tacked onto an income tax cut bill, only lasted a few days as supporters of the tax credits rallied opposition and the Senate Rules Committee removed it from the measure.

But the effectiveness of some tax breaks was questioned anew late last year by a series of reviews released by the state auditor’s office.

The review of a 32-year-old jobs tax credit that cost $120 million in 2019 found that only 11% of jobs for which companies got the credits were created because of the breaks, which were designed to increase employment largely in rural Georgia.

Tax credits are provided for jobs in certain industries, with the amounts ranging from $750 to $3,500 per job created per year for up to five years.

The review of a low-income housing tax credit found much the same thing, that most of the economic activity would have happened without a state tax break.

One incentive for capping or eliminating tax breaks, officials say, is that it could save money that the state could use to reduce income tax rates, a top goal of House and Senate leaders.

The General Assembly last year approved gradually lowering state income tax rates from 5.75% to 4.99% by the end of the decade.

New Lt. Gov. Burt Jones, a former state senator, wants to eliminate the state income tax, something that would be difficult today because it is the largest source of revenue to pay for everything from K-12 and university education and public health care programs to the Georgia State Patrol, prisons and parks.

However, Hufstetler last year said capping the film tax credits, and presumably other large tax breaks, could make slashing the rate more doable.

Tillery, the Senate budget chairman, said: “If it’s level across the board and everybody is paying the same (rate) and nobody is getting exemptions, we can cut the income tax main rate more efficiently. Right now, everybody pays more for the benefit of those getting exemptions. Many pay for the benefit of a few.”

Blackmon said there is another way to reduce rates: by creating jobs and tax-producing economic activity.

“I understand their perspective. I also understand the perspective that, as we grow jobs and grow our economy in Georgia, that also gives us the opportunity to reduce taxes,” he said. “Most of these exemptions and credits are designed to do just that.”