In case you missed it, Republicans in Washington passed some pretty big tax cuts last week. It remains to be seen just what the impact will be but most Republicans were pleased with the final outcome and Democrats decidedly not pleased. Here in Georgia, a different exercise regarding taxes is ongoing – taking a look at a myriad of tax credits and breaks that have become part of the legislature’s bread and butter.
The Senate Study Committee on Special Tax Exemption was commissioned to do the investigating and released its final report last week ahead of the legislative session to come in January. The committee looked at a number of credits or breaks for evaluation and ultimately decided to focus on six different credits:
- Historic Rehabilitation Credit;
- Driver Education Credit;
- Diesel Particulate Emission Reduction Technology Equipment Credit;
- Qualified Transportation Credit;
- Research Tax Credit; and,
- Film Tax Credit.
Using reviews from the Fiscal Research Center and the Georgia Department of Economic Development, the committee came up with recommendations for the particular credits in question, as well as some guidelines for the future regarding evaluation and creation of other credits.
There were a couple interesting nuggets in the evaluation of the historic tax credit. One, it is “seldom used in isolation” – meaning it is normally included with some combination of the Georgia Preferential Property Tax Assessment Program, the state and federal low-income housing tax credit, or the federal New Markets tax credit. Two, according to the State Historic Preservation Office of the Georgia Department of Natural Resources, “86% of projects and 95% of expenditures took place within 10 counties in the state between 2008 and 2017.”
Perhaps this is not surprising in a state where the drop in population from the highest population county, Fulton with more than a million residents, to the 11th highest population county, Muscogee with less than 200,000, is 800,000 people. However, in a state with 159 counties it is none-the-less eye-popping.
The committee ultimately agreed the General Assembly should continue the historic tax credit. Three credits were deemed unworthy of continuation by the committee. The Driver Education Credit is claimed by few taxpayers and the committee said it does not actually target those that cannot afford driver education courses. The Diesel credit had not been claimed by any taxpayers in three years and was an easy mark. The Qualified Transportation credit is not widely used and was seen as too minimal a credit to influence taxpayer behavior or benefit Georgia citizens.
The most important work of the committee is likely to have been the formalizing of a set of evaluation procedures and sunset requirements that would include a review process. “It is the intention of the Committee that these and other potential tax expenditures be evaluated on a repeating, rotating basis, so that each tax expenditure is evaluated approximately once every five years,” said the report.
The committee created a schedule running out to 2024 that would propose a review of about six credits per year. Among those on the docket in 2018 – the low-income housing credit and the Georgia job tax credit.
