Lawmakers study impact of tax breaks

ATLANTA — Georgia foregoes hundreds of millions of dollars in state revenues annually through special tax breaks designed to spur economic growth, and state legislators want to know if those incentives are actually working.

A group of senators started work this week on evaluating the dozens of tax exemptions that legislators have approved over the years.

These legislators plan to assess the effectiveness of existing programs and develop a more thorough process for evaluating new proposals moving forward.

“We’re certainly not doubting each and every person who wants to come up and do something to help their local community or their industry sector — whatever it happens to be,” said Sen. John Albers, R-Roswell, who is chairing the study committee.

“However, for us to be good fiduciaries of the state, we want to have all the information we possibly can,” he added.

The General Assembly passed several new incentives just this year, including tax breaks for music production companies that do work in Georgia, businesses that invest in small downtowns and financial companies that loan money to rural businesses.

The 10 or so tax breaks that passed are expected to cost the state as much as $483 million in lost revenue over five years, according to a Georgia Budget and Policy Institute report issued after the session.

Those measures were approved as a proposal to reduce the state’s 6 percent income tax rate floundered, and critics of tax breaks say the proliferation of incentives makes it increasingly difficult to cut taxes for the average Georgian.

“I am more interested in lowering everyone’s income tax and not having credits be so prevalent in the General Assembly,” said Sen. Hunter Hill, R-Atlanta, who is on the special panel and who is also running for governor next year.

Another state lawmaker, Sen. William Ligon, R-Brunswick, questioned whether there was an objective way to justify why one industry should receive a perk over another.

“I realize this will probably be 90 percent science and 10 percent art in how we figure some of this out,” Albers said. “But we want it to be as much black-and-white math as it possibly can be.”

Albers acknowledged that some of the breaks are “head scratchers.” But others, he said, appear to be successful, noting specifically the state’s film tax credit that is largely credited with bringing the industry to Georgia.

In 2014, the most recent complete year available, the state gave up about $319 million in revenue through the film tax credits.

Production companies spent $2.7 billion last fiscal year on the 320 feature film and TV productions shot here, Gov. Nathan Deal’s office announced last week. The industry generated about $9.5 billion for the state’s economy.

That sounds good, but a recent study from Pew Charitable Trusts noted that Georgia lacks a rigorous process for evaluating the results of this program and others. Georgia is one of 23 states that do not have a well-designed plan for regularly evaluating the effectiveness of such incentives, according to the study.

The committee’s work will likely span several years, with lawmakers taking up the larger tax incentives first. Albers said the group, which the Senate created during the most recent session through a resolution, will consider whether some incentives are worth expanding and whether others should be discontinued.

“This is going to be a big endeavor,” Albers said. “In fact, candidly, it’s bigger than we thought it was when we passed this resolution.”

Jill Nolin covers the Georgia Statehouse for CNHI’s newspapers and websites.

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