Doing away with this tax by state and local elected officials is totally irresponsible and violates their fiduciary responsibility to the voters who elected them.
The statewide annual impact of this “tax reform” is estimated at $137 million, but many believe this reduction in public revenues is going to be much greater.
Cobb officials never responded to my request for their estimated revenue loss. The Marietta Council did an incomplete analysis, and the school board member I asked about this issue was not even aware of the impending reduction in educational revenues.
The enabling legislation (HB386) provided local governments with the ability to protect against the “potentially sizable loss of revenue,” by imposing a 2 percent excise tax on energy, but both Cobb County and the City of Marietta rejected this option not only for themselves but for their local school systems. All a local government has to do to “join with the spirit” of this tax exemption is fail to adopt an ordinance enacting an excise tax on energy consuming businesses by January 1.
The term “energy” used in the bill means natural or artificial gas, oil, gasoline, electricity, solid fuel, wood, waste, ice, steam, water and other materials necessary and integral for heat, light, power, refrigeration, climate control, processing, or any other use in any phase of the manufacture of tangible personal property.
“Manufacturer” as used in the bill means a person or business, or a location of a person or business that is engaged in the manufacture of tangible personal property for sale or further manufacturing, or a person or business generally regarded as being a manufacturer.
The elimination of the tax will reduce LOST, SPLOST and HOST revenues. Cobb County Chairman Tim Lee is pushing for implementation of a HOST tax in 2013, but apparently one that exempts manufacturers. Residents of unincorporated Cobb suffered a millage rate increase in 2011 that added an average of $105.36 to their tax bill. Now the county has diminished this sacrifice to subsidize energy-consuming businesses.
Marietta has cut SPLOST projects because of declining sales tax revenues. All other city revenues have declined over the last three years and city officials have made up the loss by taking ever-increasing amounts of money from BLW reserves and revenues, delaying capital improvement projects and freezing employee salaries. The city will again raise utility rates in January and every January going forward until at least 2018. The homeowner will pay an ever increasing tax on electric, but most industries will not.
School officials are pushing for another SPLOST referendum but manufacturers will not have to contribute to this funding.
On Nov. 29 Georgia House Speaker David Ralston said the state is facing a $300 million hole in its budget. The state legislature has implemented austerity cuts to education that have cost local school systems over $400 million since 2003.
Creditable and knowledgeable organizations and individuals have expressed concern that implementation of this tax reform will result in additional cuts to education, vital services, healthcare and other “quality of life” programs already suffering from state and local budget deficits.
What are government officials thinking when they give up a big slice of revenue at this time?
Supposedly the manufacturing energy tax exemption will help attract jobs, but study after study shows that targeting specific industrial sectors fails to have a positive economic impact. Responsible individuals have called for a cost-benefit analysis of each tax break Georgia provides. This request has been ignored by Republican legislators.
What the elimination of the manufacturing tax credit will do is slow the rate of rising utility costs for manufacturers and food processors. If the real motive for HB386 is fear that high utility rates will run businesses out of Georgia, state officials need to take a hard look at the mismanagement and waste associated with generating electricity and providing natural gas, instead of punishing the individual tax payer and school systems.
State and local governments are spending more than enough money trying to attract businesses to Georgia. In 2006 it was determined by Georgia State’s Andrew Young School of Public Policy that Georgia businesses save about $10 billion a year because of tax breaks. That’s compared to a total annual state budget of just under $20 billion.
The Republican-dominated state government is using constitutional amendments and tax reform to shift tax dollars from support of public education and vital services to big business. Pumping public dollars into the private marketplace creates a false economy much like the one government intervention caused in the housing market.
Economic development tax credits and other business subsidies are at levels that knock holes in government revenues that cause declining bond ratings and require personal and property tax increases to plug.
It is time to determine if our elected officials are violating their fiduciary responsibility to individual citizens and if their single-minded loyalty to big business is responsible for the ever-increasing cost of government.
When you receive your next electric bill, look at the amount labeled “state taxes.” This item will soon disappear from energy bills received by an unknown number of manufacturing, agricultural and mining businesses in Georgia. One way or another, individual taxpayers and local school systems will have to make up the difference.
Larry Wills is a retired recycling consultant in Marietta.