Energy sales tax unfair to Georgia manufacturers
August 13, 2007 -- Atlanta, GA -- State Sen. Tim Golden (D-Valdosta) Last week, the North Carolina General Assembly overwhelmingly passed legislation that would phase out the energy sales tax for manufacturing and agricultural businesses in that state. Why is this important to us here in Georgia?

We are now the only state in the Southeast region not offering some form of sales tax exemption for energy costs associated with the manufacturing process.  This has placed our state’s economy at an unfair disadvantage by limiting our ability to competitively attract and retain businesses which offer much needed jobs and tax revenue.  With many of our counties desperately trying to bolster their economies, the state has essentially turned its back on them.

It did not have to be this way.    

Last session, I sponsored an amendment to HB 148 that would have provided our local businesses a tax reduction on the purchase of energy (oil, electricity, etc.) used for manufacturing.  The amendment was approved by the Senate Finance Committee and, later, the full Senate. Although the House of Representatives did not act on that amendment, the version of HB 148 that passed both houses just before midnight on the final day of the session included some tax relief in the form of a cap on energy costs at the March 2007 level.

This would have protected manufacturers against tax increases caused by spikes in energy costs. Legislators on both sides of the political aisle recognized the benefit of this bill: the less money a company spends on operating costs, the more it can reinvest to either expand or improve its operations.  For many of my colleagues, the amendment offered a win-win scenario for both the employer and the employee.  It would also have strengthened any tax incentive package being offered by local governments.

Unfortunately, the governor vetoed the bill – to the chagrin of many.

The burden of taxing our companies, when our competitors are not, means existing companies either have to cut costs, i.e. jobs, or charge more for their goods and services.  As well, new companies will be less inclined to relocate into Georgia and bring with them hundreds of new jobs, subcontracting opportunities, and additional tax revenue for local economies. 

This is not an empty threat.  According to a report by the Carsey Institute at the University of New Hampshire, “almost 616,000 workers in the rural South were displaced from 1997 to 2003—more than in any other region in the country.”

Since 1998, Georgia has lost 130,000 manufacturing jobs.  More disconcerting, we are on track to suffer our fourth consecutive year of manufacturing job loss.  The cost of doing business here continues to rise, yet we continue to look with dismay and disappointment when faced with another headline of another manufacturer leaving Georgia for another state.  How is this sound economic policy?

Next January, I will resume pushing for eliminating or at least phasing out the energy sales tax on manufacturers.  The proposal will allow our state to compete against other regional economies and discontinue the trend of manufacturing businesses relocating to foreign countries.  As hard as we are working to bring in new jobs, the continued loss of existing jobs have our state playing catch-up.

Manufacturing is the cornerstone of our national economy. In Georgia, it is time we establish sound fiscal policies to enable our manufacturers to compete in that economy.

•  Sen. Tim Golden represents the 8th District (Brooks, Cook, Lowndes, and Thomas counties) in the Georgia State Senate.  He serves as Secretary of the powerful Senate Appropriations Committee, is a member of the influential Finance Committee, as well as the Insurance and Labor, Higher Education, and Government Oversight Committees.  Contact him at 121-A State Capitol, Atlanta, GA 30334; by phone at 404-656-7580; or by e-mail at tim.golden@senate.ga.gov.