The Republican governor has proposed eliminating a state sales tax on the energy consumed by manufacturers and some farmers over three years and expand tax credits available to firms that create jobs. His administration estimates the tax break on energy alone would cost Georgia somewhere around $157 million. However, the budget plans presented by the governor do not include those reductions in tax revenue.
Officials in Deal’s administration said they will work with the General Assembly to implement the tax cuts. Legislators in Georgia meet for a 40-day session that started Monday.
“It’s Day 3,” said Chris Riley, Deal’s chief-of-staff. “There are 37 days left.”
Budget analysts said Deal’s administration should have accounted for the tax break. By definition, his budget is at least slightly out-of-balance.
“That’s a problem,” said Alan Essig, executive director of the nonpartisan Georgia Budget and Policy Institute. “Our position is that they should pay for it with another tax or get rid of less-priority, less-important exemptions for businesses.”
The drop in revenue caused by the tax cut would be small compared to Deal’s overall budget, which proposes some modest funding increases after state leaders hacked away at the budget during a bruising recession. Deal has asked lawmakers to spend an additional $255 million in state money for the fiscal year ending in June. That’s just over 1 percent of the previously approved budget of nearly $18.3 billion. For the coming fiscal year, Deal has proposed spending $19.2 billion. By comparison, the loss of state income from eliminating the sales tax on energy amounts to less than 1 percent of the current budget after a three-year phase-in.
When speaking to business leaders Tuesday, Deal said other states have already eliminated that tax for manufacturers. He said getting rid of it in Georgia could attract jobs in a state with nearly 10 percent unemployment.
The governor also proposed expanding a tax credit for small businesses so that it rewards companies that create 15 jobs, lowering the threshold from the current level of 50 jobs.
Deal’s administration has estimated the costs of this tax credit but his chief financial officer, Debbie Dlugolenski, said she could not recall the financial impact during a briefing with reporters.
Democratic lawmakers faulted Deal for the lack of financial projections.
“We are still wondering how we pay for it,” said Rep. Stacey Abrams, the Democratic leader in the House.
Deal is primarily relying on increased tax collections to provide the necessary funding for his new programs. His budget assumes that tax collections, which provide the bulk of the state’s money, will increase roughly 5 percent from this budget year to the following year. Tax collections increased 7 percent between November and December, according to an analysis released by budget officials.