ATLANTA (AP) -- Georgia lawmakers have gutted a proposal to sweeten tax credits for employers who create jobs, a prominent part of Republican Gov. Nathan Deal's agenda to lower the state's 9.2 percent unemployment rate.
House lawmakers voted 167-0 on Wednesday to strip out changes that would have made the state's Jobs Tax Credit and Quality Jobs Tax Credit more lucrative. Estimates from Deal's administration put the annual cost of those credits at $75 million starting in mid-2014, a cost that made lawmakers uneasy as the state tepidly recovers from a deep recession that severely reduced its tax income.
Making the credits available for more employers was a key part of Deal's State of the State speech in January when he outlined his legislative agenda.
"We will modernize our job tax credits to better incentivize small business growth and to help every Georgia community compete with their regional peers," Deal told lawmakers. "My office is already working with House and Senate leadership to create legislation to this effect."
He got a much watered-down version of what he wanted. Still, Deal spokesman Brian Robinson said the legislation was an improvement over the current system.
"The cost was higher than expected and we think we've arrived at a proper proposal that fulfills our competitive needs," Robinson said in a statement.
The changes to the plan are striking. For example, Deal initially wanted to raise the lowest-level tax credit in one program from $750 for each new job created to $2,000. Other changes would have made tax credits available to employers who create as few as 15 new jobs, a loosening of the current threshold of 50 jobs.
During the debate over the plan, the Georgia Budget and Policy Institute questioned whether a tax credit worth several thousand dollars would coax an employer into hiring new workers if there was not an underlying business need.
"Georgia cannot afford to undermine its ability to invest in education, infrastructure, and quality of life, which are far more critical to economic growth and job creation," Wesley Tharpe, a GBPI analyst, wrote in a review of Deal's proposal.
House lawmakers ultimately abandoned the largest changes that Deal sought. Analysts do not expect the current plan, which now heads to the state Senate, will significantly affect the state's income.
"It was not really a giving in," said Rep. Doug Collins, R-Gainesville, who sponsored the bill for Deal. "It was more of us saying, 'Hey, let's be fiscally prudent.'"
Besides loosening several rules, the bill would explicitly state that companies making alternative energy products or doing biomedical manufacturing can qualify for the tax credits. Still, that is not a major policy shift. Collins said those firms should have already been eligible.
"If I look at it and I don't see my industry, I might not apply," Collins said, explaining why lawmakers made the change.
Deal and other Republican lawmakers will get a second chance to change the tax system. In the coming weeks, Deal's administration is expected to unveil a plan that would at a minimum eliminate the state sales tax that manufacturers pay on the energy needed to create their products.
Follow Ray Henry at https://www.twitter.com/rhenryAP.