Analysis: Ga. tax reform council seeks to spur jobs

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ATLANTA -- Crafting a tax policy that fosters economic expansion and increased employment -- and can win passage in the General Assembly -- could prove to be challenging for the Special Tax Reform Council.
The panel only has until Jan. 10 to complete its work, not much time for the 10 of them considering the entire legislature has grappled with the same issue for years.
Wednesday's meeting illustrates the difficulty.
The agenda called for setting policy on sales-tax exemptions, corporate income-tax credits and personal income-tax design. But it postponed the personal tax discussion until a future, undetermined meeting.
The audience of mostly lobbyists was dotted with people wearing one of two kinds of stickers. One group of social-services advocates wore stickers calling for a tax increase to forestall deep budget cuts. The other group wants to replace income taxes with a type of sales tax.
On the council itself, differences of opinion became more pronounced Wednesday. The four academics pointed to testimony by business executives saying Georgia's overall tax burden is low enough to be competitive with other states. What is needed, the witnesses had said, were more attractive incentive packages.
Of the 39 tax credits enacted as incentives, most don't have much impact on job creation, the professors noted. So instead of specifying how to qualify for them in the legal statutes, the council should recommend that the legislature set a dollar figure for all of them and let the commissioner of economic development dole them out. Then they could be combined into a tailored incentive package large enough to be enticing.
Such flexibility would have also prompted CEOs around the state with existing business to expand in Georgia, according to council member Susanne Sitherwood, chairwoman of the Georgia Chamber of Commerce and president of Atlanta Gas Light Co.
That approach sounded agreeable to many on the council but not to all.
Gary Harkins, chair of the National Federation of Independent Business with 10,000 Georgia entrepreneurs as members, objected.
Competition for such a vast pool of statewide credits would always benefit big businesses, he said, because they capture the attention of economic-development commissioners.
"It's a big pool. These are small businesses. They'll drown in the shallow end of that pool," he said.
Sitting next to him was Roy Fickling, president of the Macon real estate firm Fickling & Walker, who dismissed the incentive power of the statutory list of existing credits.
"I don't know anybody who's hired an employee because of a tax credit," he said. "If you need an employee, you hire one."
Harkins didn't disagree. He merely said it was an issue of fairness, regardless of company size.
"If I want to expand my business, I should get the same credits as Kia coming in from outside," he said.
Considering small businesses create more than 70 percent of all jobs and the legislature is full of small-business owners, Harkins is touching on a major sticking point. Existing industry would also appreciate the same rewards, notes Sitherwood, who adds that her company doesn't have the ability to move its major operations to another state.
Another sticking point has to do with the age-old, rural-versus-urban debate. The current credits are earned based on geography. Companies creating jobs in poor, rural areas earn more credits than those in large cities.
Council member Jeff Humphreys, economist with the University of Georgia, convinced the council that should change.
"The current tax credits are based on (geographic) tiers which don't really make any sense," he said. "In a lot of ways, we're handicapping our best performers."
Humphreys didn't get any objections from the council members, who all come from cities. It could be an issue in the legislature, at least until the next reapportionment dilutes the rural areas' strength further.
Still ahead is consideration of more than 100 sales-tax exemptions -- including the one on groceries and prescriptions. The council did agree that new exemptions should only be considered at least a year after proposed and that most exemptions should expire after three to five years unless renewed.
But creating a sunset for exemptions also has its down side, Harkins said. Businesses considering locating in Georgia for an exemption may hesitate if they fear it will end in a few years.
And so, the business of designing a pro-business tax policy remains complicated.

Walter Jones is the Atlanta bureau chief for Morris News. He covered his first Georgia campaigns in 1976 and has been covering the capitol since 1998. He can be reached at (404) 589-8424.


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