Perdue did the right thing
Gov. Sonny Perdue reached a significant milestone last week as he finished the process of signing or vetoing the bills and resolutions passed by legislators this year.
Barring an emergency that requires him to call a special session of the General Assembly, those will probably be the last pieces of legislation Perdue signs during his two terms as Georgia’s chief executive.
Any governor will be the target of complaints because he signed or didn’t sign some particular bill, but Perdue deserves praise for one of the measures he decided not to sign into law.
Perdue vetoed a bill sponsored by Rep. Tom Graves (R-Ranger), HB 1023, that would have greatly reduced the state’s capital gains tax. A similar bill proposed by Sen. Chip Rogers (RWoodstock) was vetoed by the governor last year.
Graves, who just won a special election to fill Nathan Deal’s congressional seat, misleadingly touted HB 1023 as a “jobs bill” because it would have granted a few small tax and fee exemptions for employers.
That’s nonsense. The bill would have really resulted in a financial bonanza for Georgia’s wealthiest citizens who have significant amounts of money tied up in stocks, bonds and other investments.
The major provision in HB 1023 would have cut in half the capital gains tax that is due when stocks are sold. This capital gains tax break would have amounted to more than $350 million a year — but most of that $350 million in tax benefits would have flowed to people in the state’s top income brackets.
When this legislation was passed last year, a fiscal analysis determined that 77 percent of the benefits from the tax cut would go to the wealthiest 1 percent of Georgians (in terms of income) while 92 percent of the benefits would go to the top 5 percent of income earners.
The bottom 80 percent of Georgians — which includes middle-class workers and families — would have received about 1 percent of the total benefits from the tax cut.
Tax cuts can be a good thing. I’d certainly appreciate having a few more of them myself. If lawmakers are going to pass a tax break, however, they should adopt one that provides benefits for more than just the wealthiest 5 percent of Georgians.
Enacting a tax break that reduces state revenues by $350 million annually would have hurt in other ways. The state sells about $1 billion in bonds every year to raise money for such things as the construction of highways and school classrooms. The financial rating agencies, when considering the impact of HB 1023 on future revenues, may well have lowered Georgia’s AAA bond rating. That would have cost the state millions of dollars more in higher interest rates.
When Perdue vetoed this tax break last year, he noted that it was not a good idea to be cutting revenues when state government was trying to cope with the worst recession in more than 70 years.
“During a period of growth in our economy, the budget may be able to absorb tax cuts that result in short-term revenue reduc- tions but provide long-term economic benefits,” Perdue said in his veto message. “We are not, however, experiencing a growing economy at this point . . . the short-term revenue reduction resulting from large tax cuts cannot be sustained in a manner consistent with the budgets passed by the General Assembly.”
The situation for state government has only gotten worse since Perdue wrote those words last year. State and local governments are still struggling to find the money to pay for basic services like schools, healthcare, and public safety. Ripping another $350 million out of state revenues by giving a tax cut to the rich just blows a bigger hole in the budget.
In vetoing the tax cut this year, Perdue referred to another bill he signed that creates a special commission to review all of Georgia’s tax policies later this year and recommend changes in them.
Rather than sign a tax break that have such a major impact on state revenues, let’s give the study commission a chance to look at the entire tax structure and see where it can be improved.
Perdue had the wisdom to recognize this when he vetoed HB 1023. He did the right thing.
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