The members of the Georgia General Assembly left Atlanta at the end of March with quite a few tax proposals left sitting on their desks, rather than sending them on to the Governor’s.  Under consideration was a bill that would have cut the top income tax rate marginally while increasing some taxes on lower wage earners, and a bill that would have cut the taxes paid on leasing while increasing the title transfer fee on used cars to a value closer to their true market rate.  Those bills died.

A bill that passed, however, eliminate sales and use tax on repairs, upgrades and retrofits of large yachts.  How large?  Think closer to Rodney Dangerfield’s character’s from Caddyshack Al Cervick’s yacht, and less Judge Smail’s much more economy sized boat.  For repairs to be tax exempt, they must reach $500,000.  That’s a lot more than a scratch on an anchor.

The press and other ritual stone throwers haven’t been terribly kind to this bill.  In today’s populist fueled political environment, it seems almost tone deaf to give a tax break to the rich owners of luxury yachts. That’s the current narrative surrounding this legislation.

Let’s quickly dispel this line of thinking. This bill isn’t for the yacht owners. 

The “conservative” line against this bill is that the government shouldn’t pick winners and losers with the tax code - That everything and everyone should be taxed equally.  It’s humorous to hear these same folks sell the virtues of federalism because all states are unique and should have their own enumerated powers as they know what’s best for them.  They will always take block grants for federal spending over a uniform, one-size-fits-all national program.  Again, states know what’s best for their unique needs. 

These same folks then demand unilateral disarmament when it comes to economic policy.  They believe that Georgia shouldn’t create tax policies that play to our inherent strengths, or to mitigate competitive weaknesses.  Or, more likely, they like clinging to an empty talking point that sounds nice, but completely lacks intellectual rigor.

Neighboring Florida has tax policies that shift the burden to tourists, as anyone who has ever taken the turnpike to Disney World is surely aware.  States like Louisiana draw a significant amount of their tax base from royalties off of extracting oil.  

Each state has to figure out the balance between the tax revenues needed for basic services, how to assess and collect them, and remain a desirable place to live and do business.  Georgia has managed to do both well. We are consistently ranked among the top states to do business, and our taxpayer burden at the state level is consistently near the lowest in the nation.

The liberal argument against this bill is that it is a giveaway to those who should be paying more, not less, in taxes.  The problem with this is twofold.  We can’t tax what we don’t have, and when this was tried before on a national level, it failed. Bigly.

When a luxury tax was imposed on yachts, expensive cars, jewelry, and other “soak the rich” items in 1990, it virtually killed the US yacht making industry.  Luxury goods are quite “elastic”, in economic terms.  Buyers can choose not to buy in reaction to price changes.  Those that could afford to buy yachts weren’t hurt by delaying their purchases.  Those that built their yachts lost their jobs.

Which brings us back to Georgia not benefiting from taxes we’re not currently collecting.  Currently, Georgia has no appreciable yacht retrofitting businesses based here.  Thus, we’re not collecting these taxes we’re assessing.  Waiving them, in reality, costs us nothing.

By waiving them, Georgia stands to gain a $50 Million investment in the Savannah Yacht Center.  According to a report in BusinessSavannah.com, a study conducted by Armstrong State University predicts the center will generate 800 direct and indirect jobs, annual wages of $50 Million, and most importantly to the state, incremental tax revenues of $5.5 Million.

Currently we have nothing.  With the governor’s signature, we have the reasonable estimation that we’ll have new jobs, millions in the pockets of everyday working Georgians, and millions added – not subtracted from – state coffers.  

That’s exactly how economic federalism is supposed to work.  The state picks winners and losers every time it enacts a law, regulation, or tax.  The trick is to make sure that the actual winners are the employees and taxpayers of the state of Georgia.  Whatever benefit the yacht owners gain from doing business here is purely incidental. 

Commentary and opinion by Charlie Harper, Executive Director of PolicyBEST, a public policy think tank focused on issues of Business & Economic Development, Education, Science & Medicine, and Transportation. He’s also the publisher of GeorgiaPol.com, a website dedicated to State & Local politics of Georgia.