At an event the other night, the Governor opened the floor to questions and someone asked him about repealing the sales tax on energy used in manufacturing. The Gov. said that the “cost” of the tax cut was roughly $170 million, but that he thought they could identify enough savings to make it feasible.
“I read that we’ve lost $1 billion worth of jobs,” asked the gentleman who offered the original question. “Don’t we make enough in taxes on those jobs to pay for the tax cut.” That sounds like a no brainer but it’s a bit more complicated than that.
“Dynamic scoring” is a budgetary concept over which Congress has been fighting for years. Dynamic scoring includes changes in behavior that are expected from proposed tax cuts. For example, if we exempt the sales tax on Porsche automobiles, we expect more to be sold, and we might anticipate additional income tax from new salesroom jobs.
So in the example of the sales tax on energy used in manufacturing, a dynamic scoring model would include additional income tax revenues from jobs attracted to Georgia, or less income tax lost to jobs moving to other states.
But Georgia uses a static model for budgeting that doesn’t account for anticipated changes that ramify from tax cuts. So we must find a way to “pay for” tax cuts in a down economy like we currently experience.
I recognize that we may have gotten into the weeds on a technical budgeting issue, but I hope there are enough policy wonks among our readership that this little segment was worth producing.