Imagine if someone gave you $20 million to invest for five years. They would specify that you had to loan money to rural Georgia companies or agriculture. At the end of the five years, you would self-report how many jobs you created (or retained) with the money you invested. You would then, in the sixth year, be free of all obligations and would keep whatever money you made off the investment — and the $20 million they gave you as well. Would you take that deal?
Well, that’s exactly what Georgia passed in 2017. But here’s the catch. You had to have $100 million in assets to qualify.
Under the bill in 2017, five such entities with $100 million in assets were given $20 million each. It was my first year as Finance Chair in the Georgia Senate. We defeated the bill in the committee, but on the last day it was attached to another bill coming from the House to the Senate floor.
It was defeated by the full Senate by one vote. But then there was a motion to reconsider. One senator’s vote changed, and it passed by one vote. Since then, there has been no audit of the money, just some self-reporting.
This scam was eliminated in Florida in 2003 by Gov. Jeb Bush. Scott Walker eliminated it in Wisconsin and a state senator, Glenn Grothman, who supported it the first time but opposed it the second time said, “If you were giving such an investment scheme to little old ladies you should go to prison. I don’t know if you can go to prison for bilking gullible legislators.” In Missouri, Arkansas, Louisiana, and Texas there were similar defeats and comments.
In Georgia, it was tried again last year and didn’t make it out. It is back again this year in a bill that the House passed 157-14, House Bill 587. It is mixed in what’s called a “Christmas tree bill” with a bunch of other tax credits.
In fact, if you add up all the tax bills from the House, it amounts to approximately a billion dollars ($970 million). That doesn’t include the $100 million in this bill, among others. The Fiscal Office says the cost is zero. An arcane rule says we only show the cost in the first 5 years. The $100 million payout is conveniently after 6 years.
The bill has not gotten out of my Finance Committee. No doubt it, and many others, will be attached to something else that goes straight to the full Senate — on the last day, March 31, when confusion abounds.
With hundreds of millions of dollars in tax credits in play, I had a bill to spend a few thousand dollars to study these tax credits and their efficacy. My bill, Senate Bill 148, recommended a group of outside experts, economists, CPAs, etc. look at what Georgia needs to do to be competitive. It would look at our tax structure, workforce training, bureaucracy, and our tax credits among other things.
In fact, such a committee was formed in 2010 by the Chair of the Ways and Means Committee in the House. It spent a year and a half looking at these programs and came up with some excellent recommendations. Many of them were implemented.
These changes have been credited as the impetus behind Georgia being the No. 1 place to do business for the past decade. Had we followed all of the recommendations — which included phasing out most of these tax credits — the income tax rate of 6% would have dropped to 4%. But the Legislature couldn’t get rid of the special interest tax credits or the adjustment of the tobacco tax to the southern average.
My SB 148 has 40 cosponsors and when it came up on the Senate floor, it was passed unanimously, 54-0, by both Republicans and Democrats.
The House said if I quickly passed out of my committee several bills that they wanted, they would put out my bill. We did our part, but the House then voted down the study committee, 139-20. They said they didn’t want to spend a few thousand dollars actually studying all these tax credits. I appreciate Rome Rep. Eddie Lumsden being one of the 20.
In Georgia we collect about $14 billion in income taxes a year, but we give out about $10 billion in sales tax exemptions and income tax credits. Think about how low the income tax rate in Georgia could be if we phased out most of these credits — like the committee from 2010-11 recommended.
Until then, tax money that could be used for essential services or to reduce taxes will continue to be siphoned off from the hardworking taxpayers of Georgia.