We Won! Now What?

Last Tuesday night was a great night for Republicans across the state. We made history by sweeping all of the statewide offices and added one additional congressional seat to the “GOP” column here in Georgia. Now that the dust is settling, we’re moving into a transition phase before taking power in January of 2011. And the question arises: what should we do? Times are tough, we’re still battling a 10% unemployment rate statewide, and the budget is looming over the General Assembly like a dreary cloud. What do I believe the new Republican leadership should consider for 2011?

The Republicans in office should take a hard and serious look at the tax structure of Georgia. I would like to see the gradual reduction, until elimination, of the corporate income tax. This was in the first version of the JOBS Act written by my now Congressman Tom Graves and vetoed by the now outgoing Governor Perdue. It’s now time to try again with the incoming Governor-elect Nathan Deal (my former Congressman). Elimination of the corporate income tax would spur business growth and create more jobs. Money not spent in taxes could be invested in physical capital, human capital, or savings. Republicans in office should take steps to alleviate corporate tax burden, making Georgia more competitive for businesses, both new and established.

Another issue that Republicans need to fight to make law is zero-based budgeting. I know that’s been a favorite among the other Peach Pundit front pagers, and it’s something that makes good fiscal sense. Why not make a government department justify every penny it wants to spend in the next fiscal year? I believe this policy will go far to eliminate waste in government spending. I hope that the Republicans who lead these areas will do some actual belt-tightening without first resorting to furloughs.

2010 was a hard session to get through. 2011 doesn’t look much better. As Thomas Paine said, “These are the times that try men’s souls.” Georgia needs strong leadership through these trying times. Our newly elected leaders face tough decisions as we head forward. I hope and pray that they stand strong on their principles on which they were elected. We might not have another chance.

9 comments

  1. B Balz says:

    Welcome to Peach Pundit, Nathan. So I am curious why you feel that ‘zero-based budgeting’ (ZBB) is a good idea? I know the concept is popular and intuitively makes sense, though intuition and popularity are hardly good criteria for public policy.

    Ample evidence shows that institution-wide, annual ZBB is costly to implement and has not delivered results. I favor a form of ZBB, BTW, perhaps on a dept by dept rolling basis, periodically.

    Congressman-elect Scott is a big proponent of eliminating corporate welfare, I concur.

    • Nathan says:

      Thanks for the welcome!

      In my opinion, ZBB would make departments more accountable for the budgeting of projects and programs. My reading and understanding of SB 1 says that anywhere from 1/4 to 1/3 of the programs will only be subjected to ZBB 1 out of every 4 years, so it will be on a rotational basis. It’s not the “cure all” by any stretch of the imagination, but I believe it’ll help root out waste in state government.

      • John Konop says:

        Nathan,

        Corporate tax rate after write-offs is not an incentive to invest because it is not the driver behind business investment and is fairly low. The biggest drivers are availability to capital (debt and angel) and capital gains ie winning off the table after investment.

        I would suggest instead of using corporate tax breaks take the same money and use it for guaranteeing part of loan making it easier for a business to get capital. It is the same cost yet you would get 10 to 5 times the leverage off the money which would obviously yield way more jobs. Also it forces the business to have a well thought out plan rather than just pocketing a tax break.

        The only tax incentive I would make is for capital gains which are only realized after the sell of a business. And this help in finding investors for new projects because the lower tax rate after gain helps with the ROI. Once again this idea would spur investment which creates jobs and more tax revenue.

  2. Gerald says:

    This idea that you attract jobs by cutting taxes as low as possible is ridiculous. It has been proven false time and time again. Is there anyone that is either A) over 30 or B) intellectually honest to actually EXPLAIN Reaganomics, which by the way was a minority opinion in even the REPUBLICAN Party at the time that Reagan proposed it? Reaganomics was a one shot deal: to temporarily spur the economy by reducing tax rates that had basically been the same since World War II, and use the revenue generated by the TEMPORARY economic growth spurt to bankrupt the Soviet Union. (And in addition, there was the HOPE that reducing these tax rates would force Washington to cut/eliminate social programs. That HOPE turned out to be a fantasy, as even the GOPers sent to Washington on Tea Party support are retreating from MediCare and Social Security cuts … instead only making sham pledges to reduce spending to 2008 levels … well that was going to happen AUTOMATICALLY because the extra spending since 2008 have been BAILOUTS – which have mostly been repaid – and STIMULUS. Except that no one but the editorial pages of the New York Times is proposing another round of stimulus/bailouts. So basically, the GOP on capitol hill isn’t promising to do ANYTHING but lay off a few government workers … 90% of whom vote Democrat.)

    But continually looking for taxes to cut and eliminate does not produce long term growth, because after the market adjusts to the absence of those taxes, the boom peters out. That’s what happened after the Reagan tax cuts and after the Bush tax cuts: the market adjusts after 4-6 years and you are right back where you started. And have we all forgotten that we got a 6 year economic boom when Bill Clinton RAISED taxes? I still remember the GOP declaring that Clinton’s tax increase would destroy the economy and send us into an even more prolonged severe recession. Instead, unemployment fell to 3.8%. That’s why the GOPers who keep running around saying “I can’t BELIEVE that we are raising taxes during a recession!” folks are liars, because Clinton did it just 16 years ago and it worked spectacularly. Within 6 years of his tax increase, we were running a SURPLUS. Meanwhile, we NEVER ran a surplus under Reagan or either Bush. When are you folks going to admit the truth?

    Here’s the facts: lowering state income tax and corporate tax rates only draws folks looking for tax shelters. Sure, the big employers WANT low taxes, so does everyone. But what they NEED is infrastructure, services, and a well-trained workforce. Gee, how do you suppose we get that? State corporate and income taxes pay for public transportation (which – gasp! – includes airports, highways, roads and bridges, not just buses and trains). They pay for high quality public schools and state universities. They also pay for “quality of life” stuff like museums, parks, maintaining beaches etc. Those are the things that produce the best workers and attract them from other states. So, eliminate the corporate income tax, and not only will we not attract new employers, but the employers that we do have will leave for places that have adequate and stable revenue sources.

    That’s why as big a mess as California and New York are, most of their employers haven’t left and aren’t going to. Go talk to the big finance or technology companies in California and New York, and ask them about moving to Mississippi to take advantage of the far lower corporate tax rates. After the 30 minutes of rolling on the floor laughing are over, those folks would calmly explain to you that Mississippi doesn’t produce the highly trained workforce that they need, or even the “quality of life” amenities needed to attract those workers from other states. And even though all those chamber of commerce types publicly maintain that they want lower taxes, privately they will admit that there is a REASON why Mississippi doesn’t produce or attract the skilled workers that New York and California do, and for that reason the only way that “low-tax” Mississippi can “create jobs” is by receiving far more federal dollars than they send back. This includes the “fiscal conservative governor” Haley Barbour taking money meant to help Hurricane Katrina victims rebuild their homes and businesses and using it for a port expansion project, the same ports that Trent Lott made a career of bringing home federal money for. South Carolina? The same deal. That “fiscally conservative” state basically relied on military installations and the pork that Fritz Hollings and Strom Thurmond brought home. “Fiscally conservative” Alaska? Same deal: Ted Stevens pork.

    Look, if the GOP doesn’t exit fantasy land and start dealing with real economics – which is neither Keynesian or supply side – you guys won’t be in power long. And as for the corporate welfare thing: well there is corporate welfare and corporate welfare. The type of corporate welfare that George W. Bush engaged in: bad. But the stuff that NASA, the Department of Defense, and the Department of Energy did from the 1950s to the 1980s really benefited the private sector. As much as Sean Hannity would like you to believe that it was all IBM and AT&T, the truth is that we would have never had a high-tech sector without it. Our eliminating a lot of those programs is a major reason why we are still so dependent on foreign oil (not to mention coal): the energy companies have no financial incentive to develop new technologies, and no one else has the money to. We laugh at Obama’s plan to use NASA to conduct climate change research (never mind that they are the National Atmospheric AND Space Administration, not just the National Space Administration) and “reach out to the Muslim world”, but the fact is that NASA has been being sliced to the bone ever since the Cold War ended, even during economic booms. Think that we’d have CD players or even velcro without NASA-sponsored research?

    Here’s an idea: the state that wants to attract companies (and the workers that companies need) should have more things to do than pro sports teams, “World of Coke”, “Six Flags”, “Halls of Fame” for for music and sports (in Macon, and oh yeah the high school football hall of fame in Valdosta), and an overpriced, overrated aquarium. Businessmen in New York can woo prospective clients by taking them to Broadway shows, and the same in Los Angeles can take theirs to beachside resorts. But businessmen in Atlanta? Well, there’s the Cheetah Lounge I guess. Get the picture?

  3. Max Power says:

    Money not spent in taxes could be invested in physical capital, human capital, or savings.

    Or it could be invested in China. Georgia’s cooperate tax rate is right in the middle of the pack. Eliminating it is not going to bring in a bunch of new businesses and will only add to our budget problem.

    If you think the Corporate tax rate and ZBB will help turn this state around I’m afraid your sadly mistake.

  4. Welcome, Nathan.

    2011 is probably going to be worse than 2010 for state funds. The risk for businesses to expand, in many cases, outweighs the potential returns. A business cannot control the risk from government.

  5. cheapseats says:

    ZBB is the conservative unicorn – sounds great and would be fun but it’s a fantasy because nobody has the time to actually do it the way it is theorized. So, it would work great if we had 5 or 10 years to prepare the budgets but, in the real world it amounts to a zebra wearing a party hat.

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