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Governor rejects plan to give tax cuts to businesses and the wealthy
by Nigel Roberts
Gov. Sonny Perdue rebuffed the effort of lawmakers who attempted to ignite the sagging job market and economy by granting tax cuts to businesses and the wealthiest Georgians with his May 11 veto of HB 481.
Dubbed the Jobs, Opportunity and Business Success Act of 2009, the measure is described by its supporters as a tax incentive for businesses that could have sparked the job market. Two main features of the bill included a $2,400 tax credit to businesses for each unemployed worker they hired and a long-term capital gains tax cut.
But with state revenues sharply down, Perdue said he had to veto the plan because the state cannot afford tax cuts at this time. State revenues in April w the measure ere down $3.6 million (20.6 percent) compared with April 2008, Perdue’s office reported. In passing the 2010 budget, lawmakers considered falling revenues but failed to account for the “significant” cost of HB 481, the governor’s statement added.
Perdue said he weighed the short-term revenue loss against the anticipated benefits of the tax cuts, and the immediate needs prevailed. Moreover, the governor pointed out that the state constitution requires the government to balance the budget.
“Should the General Assembly choose to enact a budget next session that incorporates the estimated revenue reductions caused by large tax cuts, I would entertain such cuts at that time,” Perdue stated.
According to figures from the Georgia Budget & Policy Institute (GBPI), the tax breaks would have reduced the long-term capital gains tax by 50 percent, resulting in more than $300 million of lost state revenue. And the job creations portion would cost about $600 million and provide 2,200 jobs. By fiscal year 2012, Georgia would lose almost $1 billion of state revenues, the nonpartisan think tank estimated.
“The governor’s economists know their numbers,” said Alan Essig, GBPI’s executive director. “Governor Perdue saw the worse-than-expected revenue figures for April and chose not to increase Georgia’s worsening deficit.”
Supporters of the tax break are calling for lawmakers to override Perdue’s veto, which would require a two-thirds majority in each chamber, when they return to the Capitol in January.
But the plan is mired in partisan politics and ideological differences. Opponents call the plan the familiar effort to fix the economy by giving tax breaks to corporations and the wealthy, with the expectation that they would spark economic growth that would ultimately benefit the working class.
In the final hours of the 2009 legislative session, Republican negotiators added the long-term capital gains tax cut to the bill, which soured support among those lawmakers who backed the job creation portion of the measure. Ultimately, the House passed it 112 to 52, and senators voted for it 34 to 15.
Capital gains are profits from the sale of stocks, bonds and other investments. HB 481 would have cut long-term capital gains taxes by 25 percent on investment earnings in 2010 and 50 percent in 2011. According to a GBPI analysis, about 99 percent of those who would benefit from the tax cut are among the wealthiest 20 percent of taxpayers.
Only three of DeKalb’s 26-member General Assembly delegation voted in favor of the tax cut. And three Republican members didn’t vote: Reps. Jill Chambers (R - Atlanta), Mike Jacobs (R - Atlanta) and Sen. Dan Weber (R – Dunwoody).
DeKalb House delegation chair, Rep. Howard Mosby (D – Atlanta), said he opposes all plans to grant corporate tax cuts. In addition to the plan failing to make fiscal sense, Mosby said, as a legislative philosophy, he opposes “giving tax cuts to people who don’t need them.”
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