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Our Views: Go easy on the tax ax

Lawmakers need right policy mix to spur business, support key needs

POSTED: January 8, 2012 1:00 a.m.

Little has changed in Georgia's economy since last spring when the gavel ended the 2011 General Assembly session.

Yes, unemployment in Georgia has edged down a bit, below 8 percent locally. Some experts say the drop is not just evidence that more people are finding work but that many have given up trying.

State revenues have ticked up as well, so the economy is recovering, but slowly. Our state politicians, in their desire to get re-elected this fall, want to speed up that recovery however they can. The state's top three leaders, Gov. Nathan Deal, Lt. Gov. Casey Cagle and Speaker David Ralston, indicated as much in interviews with The Times last week.

As the 2012 legislature session begins Monday, the first order of business will be jobs and the economy and how to grow both through the chief tool available: tax policy.

Deal is expected to unveil his tax reform plan during speeches Tuesday at breakfast and after dinner, the goal being to spur more business growth by tweaking the state's tax policy in key areas.

One of those he mentioned last week is an elimination of the energy tax levied on manufacturers. That tax brings in some $137 million in revenue each year. The thinking is that companies freed from paying it may be more willing to expand and hire more workers.

That has been the foundation behind our state's tax policy for some time, that by making the tax climate more friendly for businesses, Georgia will lure more companies, more jobs and, in turn, more tax revenue.

It's a sound theory and a basic of economic policy. But it also needs to be weighed against the negative impact of keeping taxes so low it creates just the opposite effect. And herein lies the debate lawmakers must undertake.

Yes, businesses will want to locate to a state that doesn't tax them more than they can afford to pay. At the same time, they will seek a site that provides the proper infrastructure needs their workers demand, and that requires a certain level of government service.

Georgia has kept business taxes low for some time and has benefitted from this. The state ranks 25th in business tax climate, according to a survey from the Tax Foundation. It's a worthwhile goal to stay on the lower side of that list.

Yet at the same time, legislators need to balance the states' needs wisely and prioritize the tax dollars it spends on areas that will go just as far to foster economic and job growth. That includes high-performing schools, ample roads, safe neighborhoods and a steady supply of water. And in these areas, metro Atlanta and North Georgia can do much better.

Companies will flock to areas that have good schools, yet Georgia still ranks near the bottom in all measurable educational standards. As the economy tanked in recent years, the state cut back on school spending and froze or cut teacher pay. Many districts have been forced to lay off or furlough school employees and trim the calendar to balance their budgets, none of which leads to higher test scores or better-educated students.

Transportation may be even worse. Workers caught in gridlock are less productive and less satisfied. The challenge of moving goods and supplies in and out is greater the closer you get to Atlanta, but traffic also remains a mess in many smaller towns like Gainesville. For years, Georgia's road officials have poured pavement as fast as they could, but it hasn't kept up with demand.

The proposed transportation sales tax scheduled for a vote in the July 31 primary could ease traffic concerns in the future, if it passes and if the projects the money funds are the right ones. But it remains a moving target; by the time those new roads are built and old ones expanded, the growing number of vehicles could overwhelm any improvements. And the chances of the tax vote passing in all regions of the state appears iffy.

Water is a concern more pressing in our area and down the Chattahoochee River into metro Atlanta. The cycle of droughts and court action has left Lake Lanier's future as a water source in limbo. A dependable supply is needed to fuel commercial and residential growth, and any company seeking to expand or relocate will factor that in. The push to build reservoirs to supplement the river basin supply is ongoing but painfully slow, and may not reap benefits for years.

Last year, the legislature rejected recommendations from a tax panel appointed by former Gov. Sonny Perdue aimed at reforming Georgia's tax code. It remains to be seen if they now will go back and cherry-pick some of the panel's suggestions to create the right mix of revenue sources and tax breaks to fuel growth.

Either way, cutting taxes with a machete should give way to doing so with a scalpel used to whittle wisely, preserving old revenue streams and creating new ones while easing the burden on the middle class and keeping business taxes reasonably low.

Of course, it's an election year, so any such change is going to be hard to come by. This is a year in which many lawmakers will push across bills merely to look good to the voters back home come July and November, making real reform and true progress on issues that matter even more difficult.

Let's hold our representatives to their task and make sure they carefully study the right blend of tax policy reforms that will put people back to work and help our state prosper.



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