Per­due did the right thing

The Covington News - - Front page -

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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