Hufstetler targets $200M in savings for state budget
♦ The Senate Finance Committee is proposing a list of tax breaks for elimination. Georgia Chamber speaks against the proposal.
The Senate Finance Committee is proposing to eliminate a slew of narrowly targeted tax breaks that could boost state revenue by an estimated $200 million.
Sen. Chuck Hufstetler, R-Rome, who chairs the committee, said the measure would help offset major cuts to state agencies due to the coronavirus-related economic downturn.
“The budget cuts are 11%. We’re taking an 11% cut in the Senate. We tried to look at these items from a standpoint of if we would pass them today,” Hufstetler said Friday.
The legislation, approved by the committee Thursday, could go before the full Senate this week. It’s attached to House Bill 1035, which has already passed that chamber, so it’s in play despite procedural rules that normally block new proposals after the 30th day of the session.
Hufstetler said the Senate Rules Committee will have an opportunity to modify the bill before it goes to the floor, but he thinks substantial savings will be passed over to the House for ratification.
“I certainly hope the House will take a serious look at this,” he said. “We’re picking between these tax credits and state trooper positions now ... We need to look at which is more important.”
If the bill is passed and signed by Gov. Brian Kemp, it would go into effect in January. Lawmakers would be able to use the new revenue estimates to restore some cuts in the budget, which runs through June 30, 2021.
Hufstetler said he and a bipartisan group of senators have been reviewing tax breaks and the list is a consensus among them.
“All the exemptions on income and sales taxes come to about $9.5 billion a year — and we collect about $14 billion a year,” he said. “If we could eliminate them we could get even closer to repealing our state income tax.”
Here are some of the bigger credits and exemptions slated for repeal under the committee proposal:
♦ An agribusiness and rural jobs tax credit passed by a slim margin in 2017 would not likely pass in the current economic climate, the policy paper states. Repeal would save about $6 million, about equal to the cost of proposed furloughs for child welfare staff.
♦ A tax break on salvage vehicles costs about $19 million a year — roughly what the state spends on rural economic development.
♦ A specific tax credit on low-income housing construction would be reduced by half, for a savings of $60 million a year. The paper notes it matches “an already generous federal credit” and is used mainly by large corporations. Other subsidies would remain available. The savings would be close to the entire budget for the Georgia Department of Community Affairs.
♦ A reduction in the research and development tax credit for businesses would bring in approximately $20 million a year. The paper notes that the state wants to encourage R&D and the reduction would still leave Georgia competitive with North Carolina’s Research Triangle Park.
♦ A $4 million tax credit for renovating rural downtown districts that passed in 2017 is a good idea, the paper states, but “we believe it is best to repeal some of these new credits now, as they would not have likely passed after this recession hit.”
On Friday the Georgia Chamber of Commerce and Georgia Economic Developers Association came out against the bill.
“The bill cuts rural programs at a time when every economic model shows that rural Georgia is suffering more and will take longer to recover,” a statement released on Friday read. “It cuts historic preservation in our downtowns; telecommunication expansion in rural Georgia; takes away efforts to promote research and development of new technology; slows expansion of clean energy efforts; limits local healthcare service; cripples low-income housing construction; and slows infrastructure projects.”
Several other relatively new credits are repealed in the bill, along with others that are old, rarely used or described as so small, relatively speaking, that they don’t really act as incentives.
There also are a number of sales tax exemptions that the paper says that are either low-priority or of questionable value in terms of state policy purposes.
Among those are sales to authorities building coliseums, to the Daughters of the American Revolution, and to theater companies renting films. Tax exemptions also would be repealed on a host of items ranging from gold and silver bullion and crab bait to airline food and sod grass.
The sales tax exemption on coin-operated amusement machines would also be eliminated. “This is $32 million a year, and from a policy point of view we do not think it should be continued,” the paper states. It’s about what the state spends on the Georgia Environmental Protection Division.