Governor vetoes capital gains tax cut for small businesses

Gov. Sonny Perdue vetoed a capital gains tax cut and various tax credits for small businesses Monday, saying the state can’t afford the breaks during the weak economy.

The tax breaks, meant to stimulate the economy, were a bright spot for Republicans in the state Legislature this year. But Perdue said the recession’s drag on state coffers left him with the “regrettable” responsibility of killing the measure.

It was one of 16 vetoes the governor announced Monday.

Perdue did, however, sign off on separate legislation Monday to give home buyers an income tax credit of up to $1,800. The credit, included in House Bill 261 this legislative session, will be available on homes purchased during the next six months. The governor called it a “strategic investment that strikes at the root of this economic downturn.”

But on House Bill 481, which would have halved the state’s capital gains tax and given businesses tax breaks for hiring the unemployed, Perdue sided with budget watchdogs who felt the breaks would take too much out of an already carved-up state budget.

“I would love to see some of the provisions of 481 implemented once the economy begins to grow again and we can afford it,” the governor said.

Shortly after announcing his plan to veto the bill, Perdue released state revenue figures for April. Their bleakness seemed to back up his decision.

State revenues were down more than 20 percent last month compared to April 2008, the numbers show. That means state revenues are down 9.5 percent so far this fiscal year. Last month, the year-to-date decrease was about 8 percent, so April had a sizable negative impact on state revenues. Perdue said late last month he thinks the economy is bottoming out, but he also cautioned that state revenues always lag behind economic recovery. With state employees already taking mandatory furloughs and spending cuts totaling in the billions, Perdue said now was not the time for tax cuts — even if they would eventually stimulate the economy.

“I do not believe this legislation, although well-meaning in intent, can be afforded at this time,” the governor said in his veto message.

Supporters of the legislation, while disappointed, were not surprised. Perdue had hinted at a possible veto since the close of the legislative session, when the capital gains tax cut was added to various small business tax cuts in final two days.

“I’ve been thinking all along it was inevitable given the budget constraints that he’s trying to operate the state on right now,” said Warner Robins state Rep. Larry O’Neal, a Republican who chairs the House Ways and Means Committee, which writes tax code for the state.

To contact writer Travis Fain, call 744-4213.