The Georgia House and Senate will soon finish negotiations on the only thing they are required to do every year: pass a budget.
But in the closing days of the legislative session, they’re pondering something else: millions of dollars in tax breaks or cuts.
Georgia’s budget will come to about $25 billion for the year that begins in July.
The House, the Senate and Gov. Nathan Deal have all made their own slightly different budget proposals, but they’re united on some marquee expansions: $160 million in teacher raises, more staff to work in foster care support and 20 percent raises for state law enforcement officers. Education, counting prekindergarten through college, will still get the biggest piece of the state pie.
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Stress levels among legislators are lower in budget years like this, when state revenue is rising. Plenty of them have been around long enough to remember agonizing over cuts during the recession, when state revenue shrank for years and the state’s rainy day fund sank.
But the budget isn’t the only money-related thing the Republican-dominated Legislature is going to consider at the close of its annual 40-day annual session. Lawmakers are still looking at bills that will affect the cash flow that they will bequeath to future budget writers, from a new tax break for folks in the music industry to a statewide reset of the state’s income tax to 5.4 percent.
Wesley Tharpe, a tax and economic policy analyst at the Georgia Budget and Policy Institute in Atlanta, has been studying the estimated budget impact of more than a dozen bills.
“We would say that given the scope of the potential revenue loss, it’s important for lawmakers to prioritize which of those tax breaks are the most important and perhaps trim back the most generous ones,” Tharpe said, “simply because Georgia has finally emerged from the depressed budget days of the recession, but that’s not going to last forever.”
By the budget institute’s count, the House passed a dozen bills that create or expand favorable tax treatment for a range of things: rehabilitating old commercial buildings, producing music or video games in the state, donating to public schools or getting a big boat or yacht repaired.
If all those bills became law, the five-year total impact, starting in July, would be about $445 million, according to the institute’s estimates.
The House passed all those dozen tax breaks with pretty wide bipartisan margins, except for a revolt among some Democrats against expanding tax breaks for certain private school scholarship donations.
Now it remains to be seen what the Senate will do with those bills. Hearings are underway and senators want to see some adjustments to some of them, so the fiscal impact could be different from the budget institute’s mid-March calculation. And all the bills are subject to Deal’s review.
Those who support the industry tax-break bills come armed with economic arguments.
“Music is one of Georgia’s biggest exports,” Carter told the House when she presented her bill earlier this month. “House Bill 155 allows us to import the investment dollars and keep it strong here in the future.”
State Rep. Jay Powell, R-Camilla, said that the point of House Bill 125 is to grow a new industry in Georgia: the repair of large boats.
“This bill is intended to incentivize the creation of such an industry much like what we did several years ago for the aircraft repair industry, which has been very, very successful in creating jobs and creating an industry which did not exist before we did an exemption on aircraft parts,” Powell said, presenting the bill to his colleagues last month.
But it’s not clear at all to David Sjoquist that Georgia knows what exactly what industry-boosting tax breaks mean for the state budget. He said the state does not go back and evaluate them.
“On some of them you can see, providing the credit, you can see some new employment in some industry. What you don’t know is how much of that would have occurred in the absence of that credit,” said Sjoquist, a professor at Georgia State University and a state and local taxation expert.
For example, there is no question that since Georgia passed a tax credit for TV, film and video game production, there are more jobs in those industries here. But Sjoquist said he is not aware of any Georgia study on the value of the industry to the state budget.
That tax credit will be worth $414 million to those industries in the fiscal year that begins in July, according to a state estimate.
There’s yet another tax bill many folks are watching: House Bill 369 would flatten the state’s income tax rate at 5.4 percent for everyone, though the lowest earners could qualify for tax credits.
Kelly McCutchen, president and CEO of the Georgia Public Policy Foundation, another think tank in Atlanta, endorses that bill because it applies broadly.
“You add up all the millions that we’re spending on these carve-outs, I’d rather see it go into broad-based tax relief,” he said.
The annual legislative session is scheduled to end on March 30.
Maggie Lee: @maggie_a_lee