Sonny Perdue’s veto of capital gains tax cut enters the Republican race to replace him

Gov. Sonny Perdue’s veto of a capital gains tax cut passed by the Legislature has officially become an issue in the 2010 Republican race for governor this evening.

Earlier today, Secretary of State Karen Handel declared herself “disappointed” in the governor’s decision, and said she would have signed H.B. 481.

Yet she also said she understood the governor’s hesitation. ”I do share some of his concerns about the timing and lack of immediate relief it will offer,” Handel said.

But state Insurance Commissioner John Oxendine said late this evening tha he had no such concerns — and urged an override of the governor’s’ veto by the Legislature when it re-convenes in January.

“Cutting capital gains taxes would have encouraged more investment into the state. It is a sad day when this type of legislation gets vetoed by a Republican governor,” Oxendine said in a press release issued about an hour ago.

According to my AJC colleague Aaron Gould Sheinin, Sen. Eric Johnson (R-Savannah) — who voted for the measure in the Senate — as a gubernatorial hopeful, declined to second-guess the governor.

“I don’t care for Monday morning quarterbacks and don’t want to be one now,” he said.

In his explanation for the veto, Perdue said the state could not afford the $340 million a year in revenue the legislation would cost. “’We cannot deficit spend as the federal government does, even if those deficits generate economic growth in the long term,” the governor declared.

Don’t think an override to be automatic. Senate Majority Leader Chip Rogers (R-Woodstock), an enthusiastic supporter of the now-dead H.B. 481, put out this statement at day’s end:

“There has been no discussion of overriding any veto. It is always my preference to work with the Governor not against him. I have discussed the issue of HB 481 with Governor Perdue and while we may have some disagreements on tax policy we have far more in common. I am confident we can produce legislation next session that will be signed into law.”

That said, look for this to be a highlighted issue when the state GOP convention begins on Friday in Savannah.

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3 comments Add your comment

Kevin M Bailey

May 11th, 2009
9:18 pm

Well what do you expect, thats all that needs to be said, go Ox. The second guessing is up
to voters of Ga not the Reps and Sen who put this up for a vote.

Mike123

May 12th, 2009
6:41 am

I’d bet Gov. Perdue would have signed the Sales tax increase being pushed by Lt. Gov Cagle.

The Republicans have become the party of tax increasers, big government spenders, and funders of the banksters (gangster bankers).

Debbie

May 12th, 2009
8:32 am

National Taxpayers Union on JOBS Act Capital Gains Tax Cut:

Georgia HB 481 (JOBS Act) Talking Points – Capital Gains Tax Cut

- There are multiple real –world examples where capital gains tax cuts led to an increase in revenue
o When the federal capital gains tax was decreased from 28 percent to 20 percent in 1980, revenues rose from $12.5 billion to $18.7 billion (Cascade Policy Institute)
o When the federal rate was again lowered from 28 percent to 20 percent in 1997, revenues rose from $260 billion the prior year to $400 billion, and another $50 billion each in 1998 and 1999 (Cascade Policy Institute)
o In 2003, when the federal rate decreased from 20 percent to 15 percent, a $27 billion revenue loss was projected over the following two years. In fact, the government saw a $26 billion increase in revenues.

- That the majority of capital gains taxpayers are high-earners is a myth
o A study by the Beacon Hill institute found that 21 percent of Massachusetts’ capital gains taxpayers earned less than $20,000, while only 8 percent earned above $200,000
o The same study found that the effective tax increase would be 42 percent greater for low-income taxpayers than for high earners
o During periods of economic hardship, low-income citizens tend to rely more on income from capital gains as wages fall. A decrease in Georgia’s capital gains tax rate will lessen the burden low-income families are already facing

- Static budget scoring does not tell the entire story
o A study on HB 481 by the Georgia Budget and Policy Institute assumes an expected annual loss of $400 million attributable to the capital gains tax cut. GBPI’s analysis vaguely glosses over evidence of economic stimulus and government revenue growth, dismissing numerous precedents out of hand
o The bill’s fiscal analysis states that “the reduction in Georgia’s tax rate on capital gains could reduce the likelihood of individuals with substantial capital gains from moving to, say, Florida, to avoid paying any state income tax on the capital gains.” That erosion of Florida’s comparative tax advantage certainly makes Georgia more attractive to investment, and allows government to reap a tax windfall as a result. On average, senior citizens are three times more dependent on capital gains for their income than other households. Cutting the rate in Georgia could make the state a more appealing choice for retirees who might otherwise only consider Florida as a place to reside.
o Florida is not the only state with a competitive capital gains tax advantage over Georgia. Among the state’s other four neighbors besides Florida (Alabama, North Carolina, South Carolina, and Tennessee), only North Carolina has a higher rate. Among the entire 15-state region that the Census Bureau defines as “the South,” (excluding the District of Columbia), only two have higher capital gains rates than Georgia (two others have the same rate as Georgia).
o Testimony by the American Council for Capital Formation stated that after the 1997 federal capital gains tax cut, the S&P 500 increased 30.1 percent over the subsequent two years. 25 percent of that economic growth is directly attributable to the capital gains tax cut.
o Put succinctly: GBPI’s $400 million revenue loss is excessively pessimistic and not supported by real world precedent
o Due in part to changes in the 1986 federal tax reform law, Oregon’s state tax rate on capital gains rose from 4 percent to 9 percent. A comprehensive study conducted for the AOI Foundation determined that reducing the rate back to 4 percent would result in a 13 percent–17 percent increase in venture capital funding for Oregon. Also, depending upon the modeling and assumptions about faster turnover of assets, increases in asset values, and macroeconomic effects, the revenue impact could be as much as a $148 million per year gain (Conerly Consulting analysis for AOI Foundation)

Using practical precedent as a guide, the capital gains tax cut provision of HB 481 is likely to spur higher levels of investment in Georgia, resulting in significant economic growth. It will also likely represent a revenue increase to state government. And its positive economic impact will be felt by Georgians of all income levels.

Enactment of HB 481 will represent one of the few forward-looking, pro-growth tax cuts in the country during this economic downturn. Georgia will stand as a model for other states looking to embrace pro-taxpayer policies in the midst of a revenue crunch.