(The Center Square) — Georgia lawmakers could consider overhauling the state’s tax credits when they reconvene in January, but the specific action they take could depend on what they hear from experts over the next few months.
“The economic reality of tax credits is that when we help to expand an industry that isn’t profitable without our help, that’s bad for the economy,” University of Georgia professor Jeffrey Dorfman, the state’s fiscal economist, told members of the Joint Tax Credit Review Panel, which held its first public meeting this week. “Generally, this is not what you want to do. Thus, tax credits only make sense for business attraction if attracting that plant or employer or industry to the state is going to bring you some spillover benefit, some long-term benefit or some non-economic benefit.”
Listen to Jeffrey Dorfman directly.
The group will hold meetings across the state and recommend possible changes for lawmakers to consider.
“Keeping this in mind, tax credits should be used sparingly and for targeted opportunities only,” Dorfman added. “The general research that’s been done shows that usually 80 to 95% of the businesses that come to your state with attraction incentives — tax credits or otherwise — were going to locate in your state anyway.
“So if we offered no tax credits or any business attraction incentives at all, we would lose a small amount of new business investment, but we would still get most of what we’re getting.”
Georgia offers an array of tax credits, ranging from credits for historic preservation to the much-ballyhooed credit to attract film production to credits Peach State politicos tout whenever a business relocates to the state.
“We’re not just giving incentives away without getting something in return,” Andrew Capezzuto, chief administrative officer and general counsel for the Georgia Department of Economic Development, told lawmakers.
Curtailing or overhauling the state’s tax credits has support among state leaders.
“It is imperative that we identify tax credits with a definitive return on investment so that we can increase competition and accountability for the taxpayers,” Lt. Governor Burt Jones, a Republican, said in a statement.
“Tax credits without a return on investment could be used to lower the state income tax,” Jones added. “If we’re going to continue to be the best state in the country to do business, while recruiting and retaining a strong workforce, we’ve got to be competitive with our income tax structure.”
Additionally, the Georgia Public Policy Foundation expressed its support for the tax credit review, saying it could help lower taxes for everyone.
“The Georgia Public Policy Foundation welcomes the General Assembly’s review of tax credits,” Kyle Wingfield, the group’s president and CEO, said in a statement. “We believe there is much room in Georgia’s tax code to broaden the base and lower tax rates for all, and that doing so will help ensure Georgia remains a highly competitive state and grows in prosperity.”