SAVANNAH — A joint House-Senate panel studying tax breaks listened to a series of coastal economic success stories Wednesday, from the Hyundai plant going in west of the city to private jet maker Gulfstream, both of which have benefited from massive incentives and created thousands of jobs.
But the panel was also urged to make the billions of dollars the state gives out in tax credits and other breaks more transparent. And a conservative think tank suggested lower income taxes can do more to spur the economy without lawmakers — pushed by industry lobbyists — “picking winners and losers” and deciding what businesses get tax breaks and which don’t.
“Most economic activity would happen without tax preferences,” said Rea Hederman, executive director of the Economic Research Center and vice president of policy at the Buckeye Institute, a conservative think tank.
The panel held its second meeting of the year Wednesday, with plans to make recommendations before the 2024 session begins in January.
The meeting followed what will likely be a pattern for the rest of the year. Businesses that have benefited from the tax breaks make their case for them being job creators and helping them innovate — such as Gulfstream’s research and development team making better planes, or the company becoming a maintenance hub, with the help of tax incentives.
All the meetings have been and will be heavily attended by Capitol lobbyists who represent clients who have received tax breaks, as was the case Wednesday at the Coastal Georgia Center in Savannah, where the second meeting of the panel took place.
State auditors have said in the past that supporters of several tax incentives have inflated the impact of the tax credit. The reviews found that in some cases, most of the jobs credited to the state tax breaks would have been created without the credits or exemptions.
Jeffrey Dorfman, until recently the state’s fiscal economist, said earlier this year that with the current job market in Georgia — record or near-record low unemployment in recent years — the question is whether the state needs to work quite so hard using incentives to bring in businesses.
Eliminating or even cutting back on tax breaks once they are approved is extremely difficult because lobbyists are paid to push to keep them. And corporate giants such as Hyundai and Gulfstream can point to thousands of jobs their businesses have created or will do so in coming years.
“Economic incentives were absolutely critical to Hyundai’s decision,” said Chris Smith, general counsel at Hyundai.
The Atlanta Journal-Constitution reported in July that state and local officials promised Hyundai an incentive package that could grow to more than $1.8 billion to build the sprawling electrical-vehicle factory near Savannah.
Hederman said governments get back less than they spend on incentives, and that issues such as access to major airports, the quality of life and educated workforce are more important in attracting businesses. He said tax incentives can be a case of other taxpayers paying more or seeing less in services to pay for breaks for selected business.
“There is no magic tree that can pay for tax preferences,” he said, adding that they tend to reward big, existing businesses over startups and smaller businesses.
Staci Fox, president and CEO of the Georgia Budget and Policy Institute, a left-leaning think tank, told the panel the state needs to do regular reviews of tax breaks — something lawmakers are doing more of — and make the public aware of which businesses are benefiting and how much they are getting.
She said each tax break legislators approve should have sunset provisions, meaning they would have to be considered again by the General Assembly every three to five years. That is already done for many of the tax breaks, particularly those initially approved in the past decade.
“Georgians deserve to know where their money is going,” she said. “This is really about our state finances being managed responsibly.”
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