Politics & Government

Georgia General Assembly passes tax cuts meant to spur economy

ATLANTA — The Georgia General Assembly passed tax cuts Friday night meant to spur the economy, including a controversial cut in the state’s capital gains tax that was introduced in the waning days of the now-ended legislative session.

Republicans applauded the tax cuts as a free-market version of an economic stimulus, but there’s no guarantee that Gov. Sonny Perdue will sign the cuts into law. Legislators failed to push through another tax reform, namely a measure that would have killed off the annual ad valorem tax on vehicles and replaced it with a one-time fee on car titles.

That bill passed the House but failed to clear the Senate on Friday as midnight struck on the 40th and final day of the 2009 legislative session.State Rep. Larry O’Neal, a Warner Robins Republican and chairman of the tax-code-writing Ways and Means Committee, predicted that bill’s return next year when the 2010 session is gaveled to order.

But for now, Republicans will have to be satisfied with the multiple tax cuts they passed for businesses. Perdue said he will study the Legislature’s proposed cuts closely, particularly to see whether the state can afford them. The capital gains cut was introduced just Thursday, and Perdue cannot simply remove it from the other cuts. He must approve the entire bill and all of its cuts or none of them.

“I am always worried about pop-up revenue measures that come up,” Perdue said shortly before the session closed at midnight.

House Bill 481 contained most of the higher-profile cuts, including:

• A cut in the capital gains tax, which is a tax on profits from investments. The tax would be halved by 2011, and that would bring state tax codes in line with federal codes on this issue, O’Neal said.



• A $2,400 income tax credit for businesses that hire someone who has been unemployed for at least four weeks. The credit can be taken for each employee hired prior to July 2010, as long as they are employed at least two years.



• A phase-out of the sales tax deposit many retailers are required to keep with the state. Returning that money to businesses would inject money into the economy, proponents said.



• Abolishment of the net worth tax for businesses.



The capital gains tax was, by far, the most controversial change. It was put into the bill Thursday, replacing a phase-out in the corporate income tax that was even less popular with Democrats who fought the measure.

They contended the capital gains cut would blow an unacceptable hole in a state budget already hit by heavy cuts that have forced state employee to take unpaid furlough days. They questioned whether some of the cuts actually would create jobs, a question also raised by various state and third-party analyses on the legislation.

Democrats also noted that the cuts come as state leaders seek a sales tax increase to fund new transportation projects. They also come in the same year state leaders cut a state-funded program that provided more than $400 million in tax breaks for homeowners across the state.

“This was business versus the regular taxpayers,” said state Rep. David Lucas, D-Macon.

Of course, Democrats stuck together several times this year to beat back proposed increases in the homestead exemption. That also would have given homeowners a bigger tax break, and it’s something Republicans supported.

As for the business tax cuts, Republicans stood strong behind their legislation’s concept.

“We are going to be pro growth,” said state Sen. Chip Rogers, who sponsored the changes in the Senate. “We’re going to follow policies that have worked time and time and time again, because we know how important it is to grow this economy so that people have jobs.

“At the end of the day, it’s not about some government program or some government spending item,” Rogers said. “It is about people in this state having a job.”

Said state Sen. Nan Orrock, an Atlanta Democrat: “This bill gives business a billion dollar tax break. This bill’s going to put more Georgians out of work ... and they will be state employees.”

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