On the last day of the 2011 session, the General Assembly passed legislation, House Bill 234, to give the developers of “tourist attractions” a tax credit equal to 25 percent of their construction costs. Developers of amusement parks, resorts and other tourism destinations would be able to recoup their expenses by holding on to 25 percent of the sales tax revenues generated by the tourist attraction.

One of those who stood to benefit from the tax break was Rep. Earl Ehrhart (R-Powder Springs), who was part of a group proposing to build a baseball and entertainment complex in Bartow County costing an estimated $1 billion, which would have meant a $250 million tax payback. Ehrhart and his colleagues never did get that tax break—nor has anyone else.

Rep. Ron Stephens (R-Savannah), the bill’s primary sponsor, asked the governor’s office about the possibility of the a break being for the developer of a convention hotel near Savannah. Deal said he had some “concerns” with the hotel proposal, and the tax break was not granted.

More recently, the developers of a Westin hotel at Jekyll Island state park inquired about the tax break.  Once again, it was no sale. "That investment needs to be made on a level playing field with other competing hospitality businesses on the island and in the area,” Deal spokesman Brian Robinson said. “The governor has said we're not going to use this sales tax rebate in instances where the new entity competes with existing Georgia job providers."

With this piece of legislation, the devil is in the details.  Tax experts with two state agencies have tried to draft regulations for administering the tax rebate equitably but have been unable to come up with a workable solution.

Several provisions of HB 234 raised concerns that have not been resolved.   One is the low threshold of eligibility for the exemption; you could qualify for the tax break if your project cost as little as $1 million to build.   

Another concern was that the final decision to award the tax break would be made by the governor.  That’s unprecedented for a tax incentive. In all other cases, a business either qualifies for an exemption or it doesn’t, and approval doesn’t depend on the governor’s say-so. Critics of the bill pointed out the obvious:  Giving any governor the final authority to grant a lucrative tax break could result in decisions being made because they benefit political cronies.

Another bill may be introduced next session to try to fix the problems with the tourist tax credit, but it could have just as tough a time getting through the General Assembly as the original bill did. Legislation similar to HB 234 was passed during the administration of Gov. Sonny Perdue, but Perdue vetoed the measure because he said it would set a bad precedent. HB 234 barely made it to final passage at the end of the 2011 session.  It passed in the House by a 91-73 margin only after Speaker David Ralston cast a rare vote to give it a constitutional majority.

The bill ran into vigorous opposition among some lawmakers during floor debate. Rep. Mark Hatfield (R-Waycross) described HB 234 as “legalized extortion,” while Rep. Jason Spencer (R-Woodbine), a tea party member from Camden County, said the tax break was a handout by state government to big businesses that don’t need subsidies from taxpayers. Their comments angered the House leadership, but Hatfield and Spencer were correct.

This puts the governor and legislators in a strange position.  They’ll usually hand out tax breaks and financial incentives to any lobbyist who comes along with a halfway plausible proposition.  On this one, they can’t figure out how to give taxpayers’ money away.

Tom Crawford is the editor of Georgia Report, an Internet news service that reports on Georgia government and politics. He can be reached at [email protected].