Georgia Governor Vetoes Business and Individual Tax Breaks
May 13, 2009
Earlier this week Georgia Governor Sonny Perdue vetoed a bill that would have reduced capital gains taxes and provided businesses with job creation incentives. The bill had originally included a phase-out of the corporate income tax, but that provision was dropped from the bill before it was approved by the legislature.
The bill would have provided various tax credits to businesses who hired certain unemployed individuals. In addition the bill would have waived certain filling fees for a one year period beginning in July and eliminated the net worth tax on companies permanently after 2010.
The bill would also have allowed businesses and individuals to exclude 25% of their capital gains from income in 2010, and 50% in 2011 and thereafter. Essentially this would cut the capital gains tax in half.
This provision would have resembled the traditional treatment of capital gains at the federal level. For many years federal law provided for a 50% exclusion of capital gains while taxing the remaining half at the standard income tax rate. In 1987 the federal government stopped allowing the 50% exclusion, but began applying a preferential rate to capital gains, often at a rate of around half the top individual income tax rate. Apparently there was a general consensus that returns on investments (i.e. capital gains) should be taxed at a lower rate than wage income in order to encourage investment.
Georgia lawmakers had a similar idea, but it was shot down.