Analysis: Consumers Get Biggest Tax Breaks; New Report Puts a Price Tag on How Much the State Loses in Revenue by Giving Tax Credits and Exemptions

By Jones, Walter C. | The Florida Times Union, January 23, 2011 | Go to article overview

Analysis: Consumers Get Biggest Tax Breaks; New Report Puts a Price Tag on How Much the State Loses in Revenue by Giving Tax Credits and Exemptions


Jones, Walter C., The Florida Times Union


Byline: WALTER C. JONES

ATLANTA - The biggest sales-tax exemption doesn't go to giant corporate conglomerates or powerful special-interest lobby groups, according to the recently released Tax Expenditure Report.

The biggest tax breaks go to consumers.

That's what's made clear in the report prepared by Georgia State University's Fiscal Research Center on behalf of the State Department of Audits & Accounts. Released Dec. 29, the report is required under a new law that specifies the governor's budget recommendations include details about the "spending" of tax credits and exemptions.

Since giving a tax break means there is less money to spend on government functions, it is similar to the choices made between other possible expenditures. More money spent on education means less is available for health care, for instance.

The point of the Tax Expenditure Report is to make politicians weigh those same tradeoffs between a tax break and other things the money could go to.

Normally, spending decisions are made by the appropriations committees in the General Assembly while tax breaks are granted by the Ways & Means Committee in the House and the Senate Finance Committee.

"That's always a two-edged sword, Ways & Means and Appropriations," said Rep. David Knight, R-Griffin, is a certified public accountant and member of both Ways & Means and Appropriations.

There's still nothing to make the committees coordinate their actions, said Alan Essig, who's spent four years lobbying for requiring annual tax-expenditure reports. Essig, a former analyst in the Governor's Office of Planning and Budget, is the executive director of the Atlanta think tank Georgia Budget and Policy Institute.

However, some veteran members of both committees, like Rep. Ben Harbin, R-Evans, have the background to weigh those tradeoffs, Essig said.

"I think he comes with a perspective that others may not have," Essig said of Harbin, the former chairman of the House Appropriations Committee.

Even though they voted to require the report, many legislators didn't know it had been issued when asked about it last week. Still, they predict it could be a valuable tool.

"The short answer is yes, that information will be very, very valuable," said Rep. Larry O'Neal, R-Bonaire.

A tax lawyer by profession, O'Neal, now the House majority leader, chaired Ways & Means since the Republican takeover of the House four years ago.

Knight describes the current critical view of tax breaks as a sea change. Even though the legislature has long required an estimate of the fiscal impact of all new tax breaks before they are voted on, looking as closely at existing credits and exemptions is new.

THE PRICE OF LOOPHOLES

What the report attempts is to put a dollar figure on how much tax the state forgoes with each loophole. In many cases, the Department of Revenue can total up the amount taxpayers have saved by claiming particular exemptions or breaks.

For example, the personal exemption claimed by individuals on their income-tax form 500 each April will total an estimated $902 million during the next fiscal year, making it the biggest tax break. The manufacturer's investment tax credit totals $3 million.

Other large tax breaks include the sales-tax exemption for food at $494 million, prescriptions at $351 million and lottery tickets at $145 million. The retirement income-tax exemption amounts to $273 million.

Corporate tax credits often draw the public scorn, but the report puts them into perspective. The filmmaker's credit is $89 million, worker-training credit amounts to $50 million, historic rehabilitation $18 million, and port activity less than $1 million. …

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