Fiscal cliff fix to have little impact on Georgia budget

Morris News Service
ATLANTA – The legislation Congress rushed to the president’s desk New Year’s night to avert the so-called fiscal cliff may boost federal coffers but won’t make much of a splash on the Georgia’s $19 billion budget, according to state economist Ken Heaghney.
While Georgia, like most states, begins its income-tax calculations with the “adjusted gross income” figure from the IRS 1040 form, changes enacted to boost federal taxes for upper-income taxpayers don’t automatically alter what they owe the state.
“Georgia currently follows the Internal Revenue Code as it existed on Jan. 1, 2012, with certain adjustments,” said Jud Seymour, spokesman for the Georgia Department of Revenue. “As such, the legislature will decide if they will adopt this revised provision as well as the other changes that affect Georgia.”
Gov. Nathan Deal isn’t launching any plans to boost state taxes.
His spokesman, Brian Robinson, said Wednesday that the congressional action did remove the need to cope with sweeping federal spending cuts that were also set to occur as part of the fiscal cliff.
“We anticipated about $100 million in spending cuts, and we had a plan to move $24 million in state money to backfill the most pressing, more high-need programs, such as those that represent a life or safety need for Georgians,” Robinson said. “Of course, in these times, it’s very difficult to move around even $24 million. We don’t have a pile of money sitting around.”

Georgia policymakers have repeatedly cut state spending to cope with tax collections that have slumped since the recent recession. Just weeks into the current fiscal year, Deal instructed state agencies to plan to reduce expenses by another 3 percent.

Added revenue could avoid those reductions, but it won’t come from anything Congress did. One change actually will reduce the state’s income by raising the Social Security tax 2 percent.

That’s because businesses and the self-employed can deduct that 2 percent to lower their taxable income, Heaghney said.

“We expect the effect of that to be small,” he said.

A bigger possible consequence would have been a recession if the fiscal cliff hadn’t been averted, he said.

And that was also on the minds of Georgia factory owners and their customers, according to a report released by the Econometric Center at Kennesaw State University.

“Tax uncertainty from Washington has left manufacturers with a lot to worry about in 2013,” said Don Sabbarese, director of the center.

The Purchasing Manager’s Index decreased in December for the second consecutive month because of weak orders and slowed production.

The index dropped 1.2 points to 45.2. Generally, economists consider a reading below 50 as predicting a contraction.

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