(The Center Square) — State-sponsored tax credits are under increased scrutiny this off-session as state lawmakers ponder whether to revamp or remove some of the incentives they offer to companies.
“Government shouldn’t be picking winners and losers,” Nick Stark, director of the task force on tax and fiscal policy at the American Legislative Exchange Council, told lawmakers during a Joint Tax Credit Review Panel hearing this week.
“The tax code should be complementary; it should maintain a healthy relationship between the state and local government,” Stark added. “The state should always be mindful of how its decisions affect local government and make sure that the two are not working against each other. It should be competitive. …It should foster more economic growth in your state. Typically, that’s done through lower tax burdens that generate more economic activity.”
Georgia offers an array of tax credits, ranging from the much-ballyhooed credit to attract film production to credits Peach State politicos tout whenever a business relocates to the state. Economic officials are reticent to disclose or discuss the value of the state’s incentives to private businesses.
“Tax incentives are something that get a lot of play in the media; they are constantly talked about,” Alison Wakefield, a manager of the Pew Charitable Trusts’ work on economic development, told state lawmakers.
“They are one of the primary tools that economic developers have in their toolbox to strengthen their state’s economies,” Wakefield added. “They’re also quite costly — in the billions of dollars collectively across the United States — and it’s rising over time, as is the size of the average incentive package.”
Wakefield said Pew recommends evaluating the cost and other economic terms as a “proven way to improve the effectiveness of tax incentives.”
One of the questions facing lawmakers is the so-called “but-for,” effectively whether companies would have located to the Peach State even without incentives.
“The great value of our tax system is that it’s pro-business and pro-investment, but it’s also stable and predictable,” Clay Jones, vice president and general counsel for the Georgia Association of Manufacturers, told lawmakers.
“If you took it away, or you made it uncompetitive, then all of a sudden, you’ve unleveled the playing field, and I guarantee you it might not have been the one reason they chose to come, but it might be the reason they choose not to,” Jones added. “So, we encourage you to continue to keep things stable and predictable for our manufacturers.”
By T.A. DeFeo | The Center Square contributor