The true cost of “job-creating” tax incentives
The Atlanta Journal Constitution recently reported on two related stories. The one that appeared on February 19 focused on $75 million in tax incentives designed to attract Caterpillar into building a plant in Georgia. The argument for the break is a familiar one: Georgia will benefit from new jobs and ultimately more revenues for the state.
Sounds great, doesn’t it?
Too bad the state will never check to see what happens after the incentives are given.
Georgia grants tax exemptions and credits all the time, but never attempts to verify that the desired outcomes take place. Actually, since Georgia rarely sets measurable goals for the breaks, it pretty much guarantees that it won’t be able to measure results. How can you determine success or failure if you don’t define the standards for measuring success or failure?
When you make an investment as an individual or as a business, you define your expectations up front. And then you track progress on a regular basis to make sure your hard-earned money is working for you.
We don’t do it that way in Georgia. Apparently, all that’s required to get a tax break is to call something a “job creator.” Say the magic words and our legislature will jump through hoops to get it done for you. Are good jobs created, and are these jobs that might have been filled even without the tax break? We don’t know.
The AJC article noted that between 2003 and 2009, the state awarded nearly $473 million in tax breaks, grants and loans to entice businesses to Georgia or to keep them here. But the “state could not say whether the promised jobs were ever created.”
Before we give any more incentives and credits, Georgia needs to have effective programs that enable us to judge the effectiveness of current policies. The state does have a basic tax expenditure report that quantifies the cost of tax breaks, but that’s as far as it goes. We need to amend our laws to demand real analysis of the effectiveness of tax breaks and economic development programs.
There is a bill being proposed in the House that would be a great first step in addressing this issue. Sponsored by Representatives Chuck Martin (R – 47th District) , Ed Lindsey (R – 54th District) and Bruce Williamson (R – 111th District), House Bill 920 calls for a tax expenditure review and analysis, one that measures the impact of each break and whether value is being produced. It’s a welcome effort to bring accountability to decisions being made in our legislature. And it’s long overdue.
To be clear, I’m not arguing that there’s no place for tax incentives. I’m saying that we need accountability and transparency from our elected officials on the tax deals being cut, which includes a report card for the revenues we’re giving away.
What about the second story in the AJC, the one that is closely related to tax breaks article?
The story appeared on February 17 and was titled “Bigger classes becoming norm in Georgia?”F or the fourth year in a row, state education officials have agreed to waive class size requirements, anticipating that next school year may be the worst yet financially for local systems. The reason: School systems are facing more than $1 billion in lost revenues from the state along with steep declines in property taxes.
We may not know the benefits of the tax breaks and lost revenue for Georgians. But I guess we know the costs.
Written by: CCGA Board Member Terry Taylor