Tax increases outweighed tax breaks this year

[private]Georgia legislators have traditionally been more than willing to approve tax breaks for businesses, agricultural interests, and developers, putting dozens of these exemptions on the books over the past 10 to 15 years.

This year, however, marked a different direction for the tax legislation that flowed out of the General Assembly.

While lawmakers passed 10 tax bills that will provide tax breaks of one sort or another, they also approved legislation that will bring much more money into the state treasury through new tax and fee increases.

In its annual report on the fiscal impact of tax bills, the Georgia Budget & Policy Institute (GBPI) said the tax breaks passed this year – all of them are expected to be signed into law by Gov. Nathan Deal – will cost the state an estimated $176 million over the next five years and $271 million over the next eight years.

Those revenues losses are more than outweighed by the passage of HB 170, the massive transportation tax bill that will generate around $900 million a year initially for highway construction and bridge repairs, and will eventually bring in more than $1 billion annually for transportation projects.

Of that $900 million total, roughly $170 million comes from revenues that will be shifted from the general fund (informally known as the “fourth penny” that comes from the state sales tax on motor fuel).

The bulk of the revenues, $730 million, will be generated through increases in the state’s motor fuel excise tax, a $5 daily fee on hotel and motel room rentals, an annual $100 fee on heavy trucks, and annual fees of $200 and $300 on electric autos and electric commercial vehicles.

“The most significant tax change lawmakers enacted this year, by far, is HB 170, the comprehensive package of tax measures designed to raise additional money for transportation,” said Wesley Tharpe, a senior policy analyst at GBPI. “The measure taken as a whole is an ambitious and sensible collection of tax reforms.”

In addition to revising the motor fuel excise tax and instituting the other new taxes, HB 170 will bring more money into the treasury by repealing Delta Air Lines’ sales tax exemption on jet fuel ($20 million a year) and terminating the $5,000 tax credit for purchasers of electric vehicles ($66 million annually).

There is a smaller revenue increase expected from the passage of HB 292, which aligns Georgia’s tax code with recent changes in federal tax law. HB 292 will mean a net increase of $56 million in state revenue over the next five years, according to the GBPI report.

These are the tax breaks passed by the General Assembly:

Bill 439 will provide more than $110 million in tax credits in exchange for money to invest in low-income communities and small businesses. Half of the credits are for the Georgia “New Markets” program, similar to CAPCO ventures in other states. The other half are for an investment pool called “Invest Georgia.”

HB 308 increases tax credits for renovations in historic districts, allowing up to $25 million a year to developers who renovate large-scale historic structures. The Ponce City Market multi-use project in Atlanta is an example of a project that could qualify for the tax break. The total revenue impact over eight years will be $125 million.

HB 202 revises procedures for assessing and appraising property taxes, grants a $1.26 million yearly tax break to Mercedes-Benz, and a $350,000 tax break for an expansion project at Truett-McConnell College.

HB 428 provides a $750,000 sales tax break for the expansion of the Atlanta Aquarium and a $350,000 tax break for construction work at Zoo Atlanta.

HB 339 extends for three years the tax credit for film, video, or digital production companies. The total tax exemption is capped at $12.5 million a year.

HB 237 extends until 2020 the state income tax credit for an “angel investor” who invests in a small, startup business. The impact on state revenues will be $15 million.

HB 63 revises an income tax credit for companies that pay the costs of General Equivalency Diploma tests for their employees. It expires after 2019 and amounts to $4 million over four years.

HB 200 expands an income tax credit for companies that provide electric vehicle charging stations. It costs about $3.8 million over five years.

HB 426 renews expired sales tax exemptions for food banks and nonprofit health clinics. The state’s revenue loss is projected to be up to $6 million a year.

© 2015 by The Georgia Report

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Tags: GBPI , General Assembly , tax breaks , tax increases , Wesley Tharpe