According to the Georgia Budget and Policy Institute (GBPI), tax credits in HB 481 and HB 261 could increase Georgia’s budget shortfalls to over $3 billion in future years. The Governor has yet to sign the new tax bills into law, but must act by May 13.
The following is taken from a recent GBPI newsletter:
1) Georgia faces a deficit of $1.9 billion beginning in just two summers, but it increases to over $3 billion if Governor Perdue signs HBs 481 and 261 into law.
2) The jobs tax credit contained in HB 481 and the tax credit for purchasing a home contained in HB 261 will have a small economic impact but a large budget impact according to the official fiscal notes. The costs are much higher than the benefits.
3) Supporters of HB 481 argue the tax breaks stimulate the economy. They do not mention that the tax cuts negatively affect the economy through furloughs and layoffs of state employees, as well as more cuts to services. Research demonstrates that, during a recession, smart investments in state services are more beneficial than business tax cuts. See this summary of state spending versus tax cuts.
4) HB 481 makes a permanent change to the tax code by cutting the capital gains tax in half at a cost of $400 million, resulting in shifting the state’s tax burden away from the wealthiest 5 percent onto the rest of Georgians.
5) The capital gains tax cut was added to HB 481 on the last day of the legislative session without any public hearings or testimony.
6) State agency budgets already face over $1.5 billion in budget cuts in the FY 2010 budget. Billion dollar deficits in FY 2011 and FY 2012 will inevitably force the legislature to cut education, public safety, food safety, child protection, and other vital services which are already dealing with significant cuts in FY 2009. Further tax cuts make a bad situation much worse.
7) Governor Perdue must sign or veto legislation by May 13, less than a month away.
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