ATLANTA — Friday’s announcement that Georgia is one of 12 states to receive extra federal help in stimulating manufacturing jobs comes in the midst of elections when job creation is a major issue.
The state and most communities have their own programs for sparking hiring, and those running for office are proposing additional ones. They include tax breaks, various financing arrangements, free or discounted work space and employee training.
Gov. Nathan Deal, for example, has made jobs the center of his re-election campaign, trumpeting the designation of a small, trade magazine of Georgia as the No. 1 state to locate a business because its low taxes and giveaways. He has signed legislation to remove the tax factories paid on energy, to create a venture-capital fund with taxpayer dollars and to let developers of giant tourist attractions keep one-quarter of the sales taxes they generate.
His fellow Republicans in the legislature want to go further by reducing or eliminating the state income tax. They argue that companies paying the highest wages gravitate to states like Florida, Texas and Tennessee, which rely on other taxes instead of the income tax.
However, analysis of recently released government data indicates that income taxes don’t sway locating decisions, according to Wesley Tharpe, policy analyst at the Georgia Budget and Policy Institute, a think tank supporting increased spending on social programs.
“The fact is more taxpayers moved to Georgia from Florida since 1993 than the other way around,” he wrote Friday. “The same trend holds true for Tennessee and Texas, the other two Southeastern states that don’t tax personal income. Georgia actually gained millions of dollars in taxable income from each of these states through in-migration.”
However, a comparison of business startups by state offers the opposite conclusion. In Georgia, the rate of new business launches was 0.24 percent while it was 0.30 percent in Tennessee, 0.32 in Texas and 0.34 in Florida, according to the Kauffman Index of Entrepreneurial Activity.
The index is compiled by the Ewing Marion Kauffman Foundation based in Kansas City, which researches other aspects of job creation. Its findings suggest that the financial incentives states woo employers with don’t work representing as much as $80 billion yearly.
“All states have these types of tax incentives, and almost every city offers these types of tax incentives either to retain businesses or to attract businesses. But if you look at it in a bigger picture, these incentives just move jobs across the country,” said Jason Wiens, lead policy-engagement manager for the foundation.
Foundation researchers tracked targeted incentives in Kansas and found that companies that didn’t receive the goodies were just as likely to hire additional workers. In other words, the incentives became a bonus for doing what the companies had already decided to do.
“These tax incentives often are missing the real job creators,” he said.
Small businesses are responsible for most new jobs. And the Kauffman folks say what really helps startups grow and succeed is the opportunity for their founders to share ideas and encouragement with other entrepreneurs. It argues that tax simplicity is more important than tax reductions, and it recommends replacing occupation licenses with other forms of regulation. Since immigrants start companies at a higher rate than natives, it also suggests welcoming people from foreign lands.
Getting smarter about incentives
Georgia isn’t abandoning traditional incentives, but it is getting smarter about them, according to state Rep. Ron Stephens, chairman of the House Economic Development and Tourism Committee.
Stephens, a Savannah Republican, has sponsored or cosponsored nearly every legislative incentive proposal since the GOP took control of government.
“We used to just throw stuff out there because it sounded good,” he said.
He points to the sales-tax exemption for groceries and pharmaceuticals, noting that it stripped $1 billion from what the state had to spend but that no flood of jobs resulted.
On the other hand, Stephens describes as a good incentive the sales-tax exemption on replacement parts for aircraft owned by nonresidents. It helped companies like Gulfstream Aerospace decide to put high-paying repair jobs in Georgia. The legislature initially limited the exemption to two years, then renewed it twice before deciding to make it permanent after it concluded it works.
“In the future you won’t see any incentive come through that doesn’t have a sunset,” Stephens said, noting that it’s a political impossibility to end a tax break that doesn’t expire.
Other incentives have drawn business for the state’s ports and attracted movie making, he said. As a result, Savannah is the fastest-growing port in the country, and Georgia is now the No. 3 place for movies, bringing more than $3 billion to the state economy.
“If you do incentives right, where there is a targeted industry and you measure them and sunset them, they work,” the chairman said.
Since Georgia still has more than a 6 percent unemployment rate and its economy is growing slower than the rest of the nation, it’s likely that this year’s candidates will talk more about how to create jobs. And voters will probably have a wide choice of which type of tactics they want to support.