Georgia’s economic malaise: Transportation sales tax is only proposed fix in sight

By David Pendered

Next year’s transportation sales tax referendum appears to be the only hope for addressing any of the challenges facing Georgia’s economic development.

The sales tax would raise a projected $18.6 billion over a decade if voters in each of the state’s 12 transportation districts approve the tax in July. To put that in perspective, the state’s current budget is about $16 billion and Gov. Nathan Deal has asked his agency heads for 2 percent cuts for FY 2013, in light of economic forecasts.

These two figures illustrate the dynamic tension in this season’s crop of economic forecasts and analyses. Most of the reports point to the same conclusion – Georgia’s future, compared to other states, doesn’t look rosy:

Predictions of high unemployment rates continuing into 2020, four years after the national picture has improved, according to Robert Sumichrast, dean of UGA’s Terry College of Business;

Growth prospects will be “elusive” for Georgia, and Atlanta, for reasons including a lack of demand in Europe that will hurt manufacturers and depress exports through the port of Savannah, according to Rajeev Dhawan of the Economic Forecasting Center at Georgia State University’s J. Mack Robinson College of Business;

Georgia’s policy decisions over years have resulted in a case where the state is “now not only a relatively impoverished and poorly educated state, it’s a slow growth state too,” according to Wesley Tharpe, a policy analyst with the Georgia Budget and Policy Institute, a non-profit in Atlanta.

Alan Essig, GBPI’s executive director, says Georgia’s best strategy is to prepare for the eventual recovery by improving the education and transportation systems. He noted that the state’s business leaders identified those systems in their testimony before the 2010 Special Council for Tax Reform and Fairness for Georgians.

Nothing of substance came out of the council’s recommendations in January to the Legislature. Incidentally, the council was chaired by A.D. Frazier, a former CEO/chairman of the Chicago Board of Trade who served as COO of the Atlanta Committee for the Olympic Games.

“A trained workforce, transportation, getting the water situation fixed, and general quality of life issues are what the business community has said is important,” Essig said. “Taxes are low on the list, because taxes already are low. But politicians insist that taxes are highest on the list.”

Essig said the transportation sales tax appears to be the best opportunity to begin to meet the state’s transportation needs, which he said are vital to economic development.

Talk of tax reform is in the air under the Gold Dome, as the General Assembly prepares to convene Jan. 9.

But no specific plans have been put on the table. And significant tax reform legislation isn’t expected in a presidential election year year that’s accompanied by the state’s first legislative campaigns to be run in redrawn districts.

Meanwhile, Gov. Deal has asked his agency heads to cut their proposed budgets in light of what he called in October a “softening” revenue picture.

“The more recent trend of softening revenues since August only reaffirms our stance of cautious optimism with respect to the overall economic outlook for the state,” the governor said in a statement issued in early November.

The state’s revenue figures for November could be released as soon as the end of this week, Deal’s office said Monday.

The campaign for the sales tax hasn’t started yet. But all indications are that campaign strategists will call on voters to approve the tax in order to create jobs in the construction industry, as well as to improve the economic future and mobility of generations of Georgians.

Meanwhile, the issue of tax equity has yet to arise. That, too, is likely to emerge because sales taxes generally have a greater impact on those with lesser incomes than those for whom sales taxes account for a smaller proportion of their overall tax rate.

Editor Maria Saporta contributed to this report.