Georgia Rep. Tom Graves (R-Ranger) has taken the unusual position that for a state to pull itself out of recession it must enact pro-growth economic policies like tax cuts and incentives for businesses to resume hiring. How novel.
Rep. Graves’ HB 1023, the JOBS Act, would eliminate the state’s net worth tax, halve its capital gains tax, and give tax credits to businesses that hire new employees. It’s a bold and credible package that will help reverse Georgia’s 23 consecutive months of increased unemployment rates.
The bill is expected to come to a vote on the House floor sometime this week. A variation of this measure sponsored by Rep. Graves in 2009 passed the House and the Senate easily but was ultimately vetoed by Gov. Sonny Perdue. For the sake of the state’s economy, here’s to hoping he does the right thing this year.
ATR’s letter to the Georgia Legislature is pasted below.
March 8, 2010
As state legislatures across the country are considering ill-advised tax increases to balance their budgets, Georgia has a chance to enact a tax cut package that will foster job creation and economic growth. I urge you to support HB 1023, the JOBS Act of 2010, which would eliminate the net worth tax, halve the capital gains tax, and create incentives for job creation in the Peach State.
The JOBS Act, introduced by Rep. Tom Graves (R-Ranger), acknowledges the fact that states compete amongst each other for people, jobs, and capital. Through smart and principled tax reform, Georgia can gain a competitive edge where others in the region, such as Florida and Alabama, have flourished. HB 1023 includes the following reforms:
· A 50 percent reduction in the capital gains tax. Georgia’s capital gains tax is high when compared to its neighbors. The state sports the second-highest rate in the Southeast, with two bordering states (Florida and Tennessee) imposing no tax on capital gains. Because Georgia is facing a $1.1 billion budget deficit, it is important to note that a reduction in the capital gains tax is among the most likely tax cuts to produce more revenue to the state. The last five reductions in the federal capital gains tax—in 1978, 1981, 1997, and 2003—all increased government revenue. Georgia’s budget deficit is no reason to delay this tax cut; it is a reason to aggressively pursue it.
· Elimination of the net worth tax. This tax hit the business community to the tune of $31 million in FY 2009. When combined with Georgia’s 6 percent corporate income tax, this represents a significant levy on the state’s job creators. Very few states still impose a net worth tax; its repeal would certainly make Georgia a more attractive destination for business and capital.
· Elimination of barriers to business creation. The bill would exempt new businesses from paying state fees when applying before July of 2011. In the midst of a weak economy, it is imperative government do everything possible to get out of the way of private sector job creation.
HB 1023 gives Georgia the opportunity to differentiate from other states decrying the fictional “revenue problem” of the current recession. Rep. Graves understands that higher taxes on investment and job creation will not pull the state out of the recession. The JOBS Act is a true private sector stimulus bill – and one all Georgia lawmakers should enthusiastically support.
For a PDF copy of the letter, click here.