Delta, Gulfstream Get Special Tax Breaks from Georgia

Georgia House leaders decided to put off major tax reform this year, but lawmakers have agreed to dole out nearly $100 million in tax breaks to companies, individuals and hometown projects.

If the 12 tax breaks are approved by the Senate, they will save the companies and individuals affected $64 million in state taxes and $30 million in local taxes next year, according to an analysis by the Georgia Budget and Policy Institute, an Atlanta budget think tank.

Among the beneficiaries are Delta Air Lines, aircraft manufacturer Gulfstream and the Georgia Aquarium.

Proponents say the tax breaks will provide a much-needed boost to the state's economy and help keep Georgia companies competitive.

But others question the fairness of selective tax breaks, especially in a year when other tax bills were deferred.

"The more you exempt one business or individual, the more you shift the cost [of government] to everyone else," said Alan Essig, executive director of the institute, a frequent critic of special-interest tax exemptions.

House Majority Leader Jerry Keen (R-St. Simons Island) and others have said the chamber would put off major tax bills this year while they study proposed changes to the overall tax code. They put off approving Gov. Sonny Perdue's tax break for higher-income retirees, as well as broad proposals to cut income taxes, and eliminate or reduce car and home property taxes.

Some House leaders acknowledge they didn't do a perfect job of shutting down special tax breaks this year.

"We were trying to limit the overall impact on the state budget," said House Speaker Pro Tem Mark Burkhalter (R-Alpharetta), who sponsored some of the tax breaks, including one for Delta. "The ones I had anything to do with were bills that would have an immediate return to the state."

Senate Majority Leader Tommie Williams (R-Lyons) said the tax breaks are likely to win approval in the Senate as well. "We're typically in support of tax cuts or credits," he said.

University of West Georgia economist William "Joey" Smith said this year's tax breaks might be a last hurrah for lawmakers before they overhaul the tax system during the 2008 session.

"This could be an opportunity to give out the last few favors," said Smith, who has studied the state's system of tax exemptions. "Or, it could be that tax reform might not really be on the front burner next year."

Over the past few decades, lawmakers have passed the equivalent of $10 billion a year in exemptions. They've exempted the sale of church bells, breeding animals and shrimper bait. Corporations and agricultural interests have won myriad tax breaks. Sales taxes were removed from most groceries a decade ago, a broader tax reform that benefited most Georgians.

"Typically every year, there are probably in the neighborhood of a dozen to two dozen bills that try to give exemptions," Smith said. "These are often times viewed purely as pork items. It's not something that has really changed much in the past 20 or 30 years, or even the past 50 to 100 years."

One Georgia State University report last year suggested the state sales tax could be cut by two-thirds if all the exemptions were eliminated.

House leaders have talked about eliminating many of those exemptions. But this session, a dozen tax bills that would reduce state and local tax revenue --- and cut someone's taxes --- have been approved by the House. They include, along with estimated savings:

* Sales tax exemption for construction of a performing arts amphitheater in Alpharetta. Savings: $3 million.

* Extension of sales tax exemption on jet fuel for Delta Air Lines. Savings to Delta: $34 million.

* Two-year sales tax exemption on engines, parts, equipment and other property used in the repair of aircraft not registered in Georgia. Savings, largely to Gulfstream and its customers: $11.6 million.

The 2006 annual report for General Dynamics Corp., the company's parent, said Gulfstream revenues rose nearly 20 percent and operating earnings increased 30 percent. Gulfstream last year announced a major expansion in Savannah.

Asked about the Gulfstream tax break, Burkhalter said, "I wasn't a big fan of that one."

Headquartered in Savannah and with a site in Brunswick, the company has powerful political backing. The tax break was sponsored by Rep. Ron Stephens (R-Savannah), chairman of the House Economic Development and Tourism Committee, and co-sponsored by Keen, another coastal lawmaker. Savannah is also home to Senate President Pro Tem Eric Johnson.

Keen said lawmakers feared that Georgia would lose airplane repair business to other states that have similar tax exemptions.

Like most of the other tax bills, it passed with overwhelming support.

Other tax breaks the House approved, Keen said, were needed immediately to help construction projects.

"We passed more [exemptions] than we wanted to, but sometimes you've got to make decisions in the short term," Keen said. "Our main goal is to come in [next year] and overhaul the tax code."

Essig questions how much tax breaks for corporations really matter in terms of keeping them competitive or in business. "Is that $10 million to $15 million going to make or break a company, or is that just more profit for them? As opposed to investing in education or health care, do we really need to spend $15 million to tell a company, 'We love you?' "

A SAMPLING OF HOUSE TAX BILLS

* HB 128: Sales tax holiday. Who benefits: Back-to-school shoppers Aug. 2-5, Georgians buying certain energy efficient products Oct. 4-7. Tax cut: $21 million in fiscal 2008

* HB 148: Sales tax exemption for construction materials for an expansion of the Georgia Aquarium. Who benefits: Georgia Aquarium. Tax cut: $8 million over four years.

* HB 193: Extension of sales tax exemption on jet fuel for Delta. Who benefits: Delta. Tax cut: $34 million in fiscal 2008

* HB 225: Expands who can receive income tax deductions for contributions to Georgia Higher Education Savings Plan. Who benefits: Donors with over $100,000 in annual income. Tax cut: $2.8 million

* HB 242: Income tax deductions for buying and selling high-deductible health insurance plans and health savings accounts. Who benefits: Insurers and buyers of high-deductible plans and health savings accounts. Tax cut: $3.9 million

* HB 357: Incorporates federal tax changes into Georgia's tax code. Who benefits: Taxpayers impacted by federal tax code changes. Tax cut: $10 million in fiscal 2007, but $3 million tax increase in fiscal 2008.

Sources: Georgia Budget and Policy Institute, legislative fiscal notes, legislation



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