TAX NEWS - JUNE 2010

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Georgia Tax: Perdue signs gun bill, eliminates low-income tax credit

Georgia Governor Sonny Perdue signed into law legislation eliminating low-income tax credits for hundreds of thousands of poor Georgians.

He also signed a bill allowing people with concealed weapons permits to carry guns at airport pick-up and drop-off points.

And he signed a $17.9 billion budget for the upcoming fiscal year, cutting out a few construction projects added by lawmakers and vetoing language that would have eliminated CRCT tests for children in grades 1 and 2 and writing assessments in grades 3 and 5.

In all, Perdue, who is serving the last year of his second and final term, signed dozens of bills. He also vetoed 27 bills, including two aimed at cutting government spending and another that would have slashed in half state taxes on long-term capital gains, such as stocks and bonds.

Tuesday was the final day for Perdue to sign or veto legislation from the 2010 session. The budget for the upcoming year, down $3 billion from just a few years ago, takes effect on July 1.

With the recession slowing tax collections, the spending plan includes continued cutbacks in every area of state government, from education to health care.

"We have actively managed the budget in a step-down approach as revenues have continued to slide, and today the state has 6,000 fewer employees than two years ago," Perdue said. "Just as Georgians are balancing their checkbooks and making tough decisions in difficult times, the state must and will do the same."

He vetoed relatively little from the budget. Among the casualties were $2 million for the reconstruction of Clarkdale Elementary School in Cobb County and $6.4 million for infrastructure improvements at Kennesaw State University.

The governor said the academic tests that lawmakers wanted to cut were too important to eliminate. He also struck language cutting funding for PSAT and Advanced Placement exams.

The budget that Perdue signed might already be out of balance. It anticipates nearly $400 million in federal Medicaid money that hasn't been approved by Congress. Thirty states have written budgets expecting Congress to extend extra funding for Medicaid, but that hasn't happened. If it doesn't get approved, it will mean further spending cuts.

On other legislation, Perdue did not explain why he signed a bill eliminating $26 to $52 in annual tax credits to hundreds of thousands of Georgians who have no taxable income. The credits were designed about two decades ago to partially reimburse the poor for state sales taxes they pay. The AARP had lobbied Perdue to veto the bill because many seniors receive the tax credit. Supporters of the legislation called the tax credit a form of income redistribution. Eliminating the credits saves the state about $22 million.

"We are disappointed that the governor did not listen to the needs of the state's low-income residents," Kathy Floyd of AARP Georgia said. "Georgia deserved better."

The gun bill Perdue signed is an overhaul of the state's laws applying to weaponry and public gatherings. Perdue did not explain his decision on the bill.

However, the measure's sponsor, Sen. Mitch Seabaugh (R-Sharpsburg), said the new law "protects lawfully carrying citizens from unknowingly becoming criminals by clarifying where they can and cannot carry weapons."

Ed Stone, president of the gun rights group GeorgiaCarry.org, said, "It is vital for law-abiding citizens who wish to arm themselves for self-defense to know definitely what places are off limits. GeorgiaCarry.org believes that this legislation is an important step in the restoration and full implementation of law-abiding citizens' right to bear arms."

Perdue vetoed another bill that would have permitted the carrying of licensed weaponry in parts of airport terminals  that aren't covered by federal restrictions. The governor said it was unnecessary after he signed the Seabaugh bill.

Conservatives were upset over Perdue's veto of two bills designed to cut government spending. One would have required state agencies to essentially write their budgets and justify everything they wanted to spend. Another would have required state agencies to come under periodic review to determine whether they should exist or be eliminated or merged with other agencies.

In his veto message, Perdue cited several reasons for vetoing the budget bill. He said lawmakers already had the flexibility to dig deep in reviewing agency budgets. He said the state would have to create a bureaucracy to implement it, and that such "zero-based budgeting" had produced few results in other states "worth the overhead."

On the agency review bill, Perdue wrote in his veto message that lawmakers already had the ability to pass a law to eliminate an agency and eliminate its budget.

Conservative groups had lobbied hard for both bills. Virginia Galloway, state director of Americans for Prosperity, said on Tuesday that she is urging lawmakers to override the two vetoes.

"Governor Perdue's veto of this key legislation is a slap in the face to conservatives across Georgia, especially to the thousands who contacted his office by phone or e-mail asking that he sign the bills into law," she said.

Perdue's veto of the capital gains bill wasn't a total surprise. It was part of a much-touted "Jobs Act," backed by Republican House and Senate. A less watered-down version passed last year.

He vetoed that bill, in part, because of the cost to a state government short of money. The capital gains tax cut would have saved investors -- and cost the state -- about $340 million a year when fully implemented. The bill also would have provided a tax break for investors willing to put up the money for certain small start-up businesses.
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