Fresh Loaf

Among the many crazy things to happen on the last night of the General Assembly was the passage of HB 481, a Republican-backed, home-grown economic stimulus bill offered as a response to the federal spending plan being pushed by Pres. Obama.

In its early form, the House bill’s centerpiece was a tax credit for employers who make a point of hiring laid-off workers. But in the waning hours of the session, it somehow morphed into a billion-dollar capital gains tax break. That’s the sort of sweeping policy change that typically undergoes several days, if not weeks, of debate and discussion, as happened with the large corporate tax cut that passed a few years back.

But in this case, lawmakers voted to blow an estimated billion-dollar hole in the state budget almost as an afterthought: “While we’re at it… ” Every Republican reflexively voted in favor of the tax cut because, well, that’s what Republicans do, isn’t it? If you’d taken an extra-long smoke break, you’d have missed the whole shebang.

Just after the vote, I asked Sarah Beth Gehl, deputy director of the Georgia Budget and Policy Institute, if she was worried about the impact the action would have on balancing future state budgets. I expected a fiscal policy wonk like Gehl to be upset over such a rash move by lawmakers, but she shrugged her shoulders.

(more…)

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Essig

Last week, the Georgia General Assembly passed the Jobs, Opportunity and Business Success Act, a package of bills that offered tax cuts and credits for Georgia businesses. Proponents said the legislation would help spur the economy and create jobs. Alan Essig of the Georgia Budget and Policy Institute writes below that such cuts, while well-intentioned, hurt the state in the long run.

Well-intentioned as they may be, state legislators pushing hundreds of millions of dollars of business and special interest tax cuts in the name of job creation and economic stimulus are doing far more harm than good. Notwithstanding that Georgia is already one of the lowest tax states in the nation, research and experience proves that state tax cuts for business and other special interests have a negligible overall economic impact and are not a cost-effective method to stimulate Georgia’s economy and create jobs.

In this time of economic and fiscal crisis it is incumbent upon legislators to stop grandstanding, pandering, and misleading the public. While the state budget should prioritize limited state funds for state programs that have proven to have the most value, that same value-based approach should be used in making tax policy.

The economic crisis Georgia faces is a national problem, and misguided legislation calling for hundreds of millions of dollars in state tax cuts won’t stem the tide of the national recession; not only doesn’t it help, but it hurts.

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Sonny must read the Loaf.

In a speech today in Athens, the governor told reporters he’ll propose a state budget that includes significant spending aimed at giving Georgia’s struggling economy a shot in the arm. The state will use its strong bond rating to borrow a wad of cash, he said. Perdue didn’t mention specific figures or how the money would be spent, but in past years, Georgia has typically issued about $1 billion in bonds for capitol projects.

The borrow-and-spend approach is one that was offered by Alan Essig, executive director of the Georgia Budget and Policy Institute, in my article in this week’s paper. Perhaps the governor was paying attention.

But more likely, it’s commonly accepted wisdom that the state government needs to act to help shore up Georgia’s economy. House budget chief Ben Harbin had told me he thought Perdue was considering a big bond package. No word yet on whether Sonny is thinking about raising taxes, as the experts I talked to suggested…

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Don’t stop, get it, get it! Head to your nearest Circuit City, people, because the state’s annual Energy STAR holiday begins…oh, well it started at 12:01 a.m., but better late than never!

From now until midnight Sunday, Energy-Star appliances less than $1,500 are sales-tax free. That’s right: Washers, dryers, dishwashers and other contraptions that make your life hum are more affordable all this weekend. Something new this year: Select water-saving appliances will be eligible for the same deal. So if you want to save cash at a time when energy rates are predicted to rise, now’s a good time.

The holiday may be bittersweet this year for cash-strapped Gold Dome and city hall officials, however. According to the Georgia Budget and Policy Institute, the annual Energy STAR and school supplies sales-tax holidays deprive the state and local governments of $12.6 million and $8.5 million, respectively. But Gov. Sonny Perdue has promised to bring us back “jobs” from his “fact-finding mission” to Europe, so they’ll make it up somehow, I’m sure.

For a full list of appliances, click here.

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Our friends at the Georgia Budget and Policy Institute pointed us toward a couple of depressing reports today from the U.S. Census Bureau.

One said Georgia’s poverty rate was a lot higher in 2007 even than it was in the depths of the 2001 recession. Not only that, but middle-class Georgians haven’t gained any economic ground since the recession.

The other report said more people in the state now don’t have health insurance.

“Even after six years of economic recovery, Georgians have not regained the ground lost in the 2001 recession,” GBPI Deputy Director Sarah Beth Gehl said in a statement. “With the weakening of the economy in 2008, things are likely to get worse before they get better.” (more…)

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