When lawmakers return to the Georgia Capitol next week, they will likely be eyeing cutbacks to tax credits and exemptions to pay for a priority of Senate leader Burt Jones.
The Republican lieutenant governor, who is campaigning for the governor’s office, has said he wants to abolish the state income tax.
The 5.19% tax generates $16 billion for state government, so deleting it would open a sizable hole in the $37.7 billion budget.
That is why one of his top lieutenants, Sen. Blake Tillery, R-Vidalia, has been talking about cutbacks to some of the $30 billion in state tax breaks.
Tillery, who is campaigning to succeed Jones, will have significant say over the next state budget as chair of the Senate Appropriations Committee. He was tapped by Jones to lead a Senate study committee on eliminating the state income tax, which will convene again Wednesday.
“It is not a question of if we go to zero, it’s when and how we take our income tax to zero,” Tillery said at a hearing in November.
In the intervening weeks, the Georgia Department of Audits and Accounts has released analyses of at least a dozen of the state’s credits and exemptions. Perhaps some of them could be clipped or eliminated to pay for lower income taxes.
Here is a summary of what they do and how much they deduct from state revenues.
- The credit for employer provided child care was enacted in 1994 to help employers help parents enter the workforce. Only about a thousand entities tap it, around a quarter of a percent of all businesses in the state. It is expected to divert $18.2 million from state coffers for the fiscal year that started in July while adding $21.6 million to the economy. Yet the analysis determined that parents who benefit would have worked and accessed child care anyway, resulting in zero return on investment. But the review notes that early child care improves outcomes for children.
- The sales tax exemption for personal and laundry services cost the state $176.6 million in the fiscal year that ended in July while adding $249 million to the economy and 7,095 jobs. The average cost per job was $23,481.
- The PEACH Education tax credit dates to 2017. It credits taxpayers who donate to public education. The credit increased donations to public education nonprofits by 23% in the fiscal year that ended in July, at a $5 million cost to the state.
- The foster care tax credit was enacted in 2022 to increase donations to organizations that support aging foster children and “justice-involved” youth. It is expected to cost $11.1 million in the fiscal year that started in July.
- The Qualified Education Expense Tax Credit, enacted in 2018, cost $88.8 million in the fiscal year that ended in July. It gives taxpayers a dollar-for dollar income tax credit for contributions to private school scholarship funds. “The credit merely shifted education expenditures from public to private schools, with no impact on the state economy,” auditors reported.
- The law enforcement donation tax credit, enacted in 2022, credits donations to qualified foundations. It cost $12.2 million in the fiscal year that ended in July, increasing such donations 48%.
- The rural hospital tax credit, enacted in 2017, credits donations that help increasingly vulnerable, small rural health care facilities stay afloat. It cost the state $79.5 million in the fiscal year that ended in July, increasing donations 28%.
- The vehicle trade-in tax exemption cost $129 million in the fiscal year that ended in July and reduced local revenue by nearly $240 million. It saved consumers an average $1,193 per vehicle.
- The manufacturing investment tax credit was enacted in 1994 to stimulate investment in the manufacturing and telecommunications sectors. It cost $144.2 million in the fiscal year that ended in July 2024, costing an average of $816,477 for each of the 176 jobs it created.
- The sales tax exemption for administrative and support services was by far the largest in this group, costing the state $1.2 billion in the fiscal year that ended in July. It resulted in 22,687 jobs at an average cost of $50,196 for each. It added $1.64 billion to the economy.
- The tax exemption for waste management and remediation services cost $79.7 million in the fiscal year that ended in July, resulting in 405 jobs at an average cost of $193,086 for each.
- The data center sales tax exemption, enacted in 2018 to encourage companies to build them in Georgia, exempts a portion of construction materials and purchases of computers and servers from state and local sales and use taxes. At a cost of $474.2 million in state tax revenue for the fiscal year that ended in July, it was the second largest in this group. (The study did not quantify the cost of exemptions from local sales and use taxes.) The audit said only 30% of data centers chose to locate in the state because of the exemption, which resulted in 28,350 construction jobs and 5,471 data center operations jobs. The cost worked out to an average of $15,506 per construction job and $85,414 per operations job.