UGA Center for Agribusiness and Economic Development
Beginning in 2013, many of Georgia’s local governments started seeing downward trends in tax collections, causing local budget-makers some concern. The causes of local tax dips are hard to pinpoint, but some are pointing to the GATE, or Georgia Agriculture Tax Exemption.
GATE is a two-year-old program, created by Georgia House Bill 386, that offers qualified agricultural producers a sales tax exemption on agricultural equipment and production inputs. The program refined and replaced the Agricultural Certification of Exemption (ST-A1).
The truth is that several tax changes went into effect in Georgia in 2013. Perhaps the biggest changes were to the ad valorem and sales taxes for automobiles, and tax exemptions for energy. To help identify the root of the decline, economists at the University of Georgia Center for Agribusiness and Economic Development conducted an analysis to determine the causes of the tax collection decreases that local communities are facing.
Here are the findings of that analysis:
In looking at the Georgia Department of Revenue’s published commodity reports of sales tax distributions by county, broken down by business type as defined by North American Industry Classification System codes, it’s clear that shifts occurred over the two-year period since the tax changes went into effect.
The classification system divides the state’s tax collections into sectors: accommodations, automotive, construction, food and bar, general merchandise, home furnishings, manufacturing, miscellaneous, other retail, other services, utilities and wholesale.
When comparing 2011-2012 tax distributions to 2013-2014 tax distributions, the sector changing the most dramatically (as a fraction of the entire sales tax distribution made to counties) was automotive (-7 percent), while gains were made in food and bar (+2 percent), general merchandise (+2 percent), other retail (+2 percent) and construction (+1 percent) sectors. All other sectors essentially stayed the same in terms of proportion of the whole.
Items allowed under the GATE program fall into several of these categories, including those that saw increases.
Looking at the 24-month period before and after tax changes in terms of counties, the average Georgia county sales tax distribution declined by 7.9 percent. There were 134 counties that showed decline.
After removing data for the automotive sector, only 73 counties showed decline. The average change, without automotive, for all counties becomes a decline of only 0.31 percent.
Average Georgia county sales tax distributions actually went up by 5.9 percent over the time period when including the Title Ad Valorem Tax (TAVT) distributions (from another Georgia Department of Revenue report) with sales tax distributions. But 20.8 percent, or 33 counties, did show negative growth in the time period compared once TAVT distributions are included.
These reports help shed light on sales and TAVT tax distributions to Georgia localities before and after the tax changes. However, exact causation of the decline cannot be pinned down to one specific tax or tax exemption because sales taxes can be affected by a wide variety of national, state and local economic conditions.