Are tax breaks for corporations a good deal?

Moderated by Rick Badie

Legislators often say they must cut spending while they simultaneously reward big corporations — the job creators — with tax breaks and incentives. Today, a former state budget analyst questions this practice, while a state chamber executive cites its economic benefits.

Commenting is open below.

Some tax breaks might not work

By Alan Essig

The 2013 General Assembly is considering giving special tax treatment to encourage mobile home sales, help Georgia’s aircraft maintenance companies compete against their counterparts in other states, and lower the cost of zoo construction projects.

The tax breaks on the menu would diminish state revenues by tens of millions of dollars if all became law. That would be on top of the nearly $300 million in corporate tax credits for economic development Georgia now hands out each year.

This should raise eyebrows even if state budget cuts to education weren’t still causing teacher furloughs and layoffs across the state, while a lack of transportation funding results in long commutes for workers in Atlanta’s northern suburbs.

Supporters say their specific tax break is worthy because it will deliver jobs. Corporate beneficiaries or their lobbyists will often characterize their tax break as a potent job creator at committee hearings.

Lawmakers, who decide which tax break bills reach the governor’s desk, lack an independent method to conduct cost-benefit analyses to help them make informed choices about which breaks live up to their promises.

For example, the Legislature is considering extending a break on taxes paid by maintenance companies that work on aircraft based outside Georgia. Officials for Gulfstream, a maker of private jets on Georgia’s coast, say they need the tax break to be competitive against similar companies in other states.

A tax break for Gulfstream enjoys bipartisan support. No doubt it would cause some out-of-state repair business to continue coming to Georgia, resulting in more jobs. So, if we’re going to give up tax revenue we could use for education and transportation, how many jobs are we getting in return? How long will those workers be on the payroll?

Is Georgia getting more or better jobs with the aircraft tax break than it would for a proposed $30 million tax break program to encourage redevelopment of downtown districts? Would the state get more bang for the buck by approving the pending bill to cut the sales tax on mobile homes?

Legislation introduced this session proposes taking a small step toward increasing the public’s ability to understand the trade-offs the state makes when it approves a new tax break. Introduced this year in the Georgia House by state Rep. Chuck Martin, R-Alpharetta, House Bill 454 creates a path to independent research that lawmakers can use to decide whether to extend an existing tax break.

It’s a good start that should result in a public report that sheds more light on whether specific tax breaks help the economy or create jobs.

Gridlocked roads and an underfunded education system are cited by businesses as reasons they locate in neighboring states. We don’t know the cost of perpetuating those problems because the state diverts scarce resources to tax breaks that may not work.

Alan Essig is executive director of the Beorgia Budget & Policy Institute.

Tax credits key to state’s success

By Chris Clark

Georgia has announced eight corporate expansion or locations already this year. Fifteen Fortune 500 companies and a thousand Fortune 1,000 companies call our state home. CNBC included Georgia in its top 10 states to do business, and Area Development magazine ranked us No. 2.

These rankings matter, and they don’t happen by accident.

During the past four years – even as the recession lingered – Georgia has experienced consistent economic growth. In the last fiscal year alone, more than 400 corporate expansions or locations resulted in nearly 29,000 jobs and almost $6 billion in investment in our state.

To what can we credit this success?

The overriding reason is a commitment on the part of our elected leaders to foster an attractive economic climate — one that not only draws companies to our state, but also keeps them here, where they hire Georgians, pay local property taxes and contribute to our communities.

Corporate leaders consider a number of factors when making a location decision. Quality of life, climate, logistics and the availability of a skilled workforce all play a role, as does the cost of doing business on which the local and state tax burden has a significant impact. Decisions are not made in a vacuum. For Georgia to be competitive in today’s global market, we must do all we can to not only level the playing field with other states and countries, but to rank as favorably as possible when compared to our competition.

The stakes are high. When a company selects a location other than Georgia, we lose jobs, revenue and the positive impacts that come from a vibrant economy. It is important that we maintain a system of tax credit and incentive programs that not only makes us competitive globally, but ensures results in a way that helps us keep existing jobs, attract new industriesand protect other taxpayers.

One great example is the removal of the sales tax on energy used in manufacturing, passed by the General Assembly last year. Georgia was the only state in the Southeast that still levied that tax; to not end it directly threatened our competitiveness. Not only did this decision support the state’s existing agriculture and manufacturing companies, it played a key role in several recent location decisions.

It is true that, despite the impressive growth reported last year, Georgians continue to feel the impacts of the most recent recession. Our unemployment rate still hovers above the national average. We have yet to regain all of the jobs that were lost. Maintaining an attractive business climate will help us create jobs and allow businesses large and small to thrive.

Our global competitiveness has never been more important to our future. Tax incentives, along with education, transportation and our ability to work regionally to support today and tomorrow’s businesses, will continue to be a key factor in our success.

Chris Clark is president of the Georgia Chamber of Commerce.

16 comments Add your comment

Dave

March 7th, 2013
10:34 am

What md and Shamehia said below is right. I’m pretty much a liberal; but, I do know that corporations aren’t people, despite the views of the current Supreme Court. When they “pay” taxes to governments they don’t magically find the money on a street corner, they get it from the money people paid to them for stuff. All we do by “taxing” corporations is mask what real people actually pay for government.

USC-69

March 7th, 2013
8:13 am

Job creation by corporations? These money pits have been living the life of Riley for 5 years while unemployment has soared and middle class incomes have stalled or fallen. C.E.O.’s with 50-100 million annual incomes? Semi-retired Board members with a million each? Trillions in corporate accounts, uninvested, unused, unproductive. Low paid or unpaid Chinese, Indian, Malaysia, Taiwan garment workers pounding out American retail products for peanuts while the C.E.O. luxuriates in a high rise waiting for the next committee meeting. Minimum wage increase? Never. This is where the money is that should be in Medicare, Medicaid, Social Security, Defense, Highway and Bridge repair, Minimum Wage, etc. Tax Breaks? GIVE ME A BREAK.

meno

March 6th, 2013
10:02 pm

I think it is an interdependent relationship–the two need each other for society to really flourish. Having such a knee-jerk anti-government mindset is not very helpful.

md

March 6th, 2013
6:52 pm

“And can you give an example of anyone in the private sector earning any money who didn’t benefit from some kind of government spending some sort that made their earning possible?”

You have it backwards…..the private sector can exist without a gov’t but a gov’t can not exist without a private sector in a capitalistic society.

Where do you think that gov’t gets it’s money to “help” the private sector?

From the private sector……….

An observer

March 6th, 2013
5:23 pm

We need to lower corporate taxes for all businesses and we can do so by getting rid of breaks that apply to a few. Same thing with individual taxes, get rid of deductions so individual tax rates can come down.

meno

March 6th, 2013
4:40 pm

But it also must ALL come from the private sector as gov’t has no money…….

And can you give an example of anyone in the private sector earning any money who didn’t benefit from some kind of government spending some sort that made their earning possible?