Georgia Tax Revenue Already Up $880 Million. 5 Reasons Why.

How many times have you heard a politician promise to raise tax revenue, without raising taxes? Often it seems far-fetched and outside of the politician’s control, and often it is. But, in Georgia, that is what’s happening right now.

Last week, Gov. Nathan Deal released the May 2017 tax collection numbers. At the end of May, year-to-date net tax revenue collections have increased by $880.3 million, or 4.7 percent, from the fiscal year 2016. In May alone, tax revenue grew, compared to May 2016, by $161.5 million or 10.3 percent. These tax collection increases are crucial, as Georgia continues to make up for recession created funding cuts–think stopping sinkholes from appearing on the main highways.

Thus, it is important to understand how Georgia is collecting more funds and how to replicate those results.

The significant increase in revenue is primarily created by the revenue increases in the individual income tax ($509.7 million or 5.4 percent) and the net sales and use tax ($222.3 million or 4.4 percent).

There are a plethora of factors contributing to the tax revenue increase, but here are five big ones to keep in mind:

1. Record-Breaking Tourism

Travel in Georgia has been higher than its ever been in the last couple years. In May, Georgia’s Department of Economic Development announced that Georgia’s tourism industry increased by 3.5% in 2016, from its record-breaking year in 2015. That had an enormous impact on the FY16 state and local budget, with the Department of Economic Development estimating that each Georgia household would have to pay an extra $900 per year to replace the taxes collected from tourist. As Georgia’s tourism industry continues to grow, more outside money is spent in Georgia, which has a direct effect on the states sales tax revenue.

2. Major Population Increases

Georgia has seen major population increases recently. Per the US Census Bureau, Georgia’s population grew by 110,973 people between 2015 and 2016, which made the state the 7th fasting growing in the nation. As Georgia’s population continues to grow, these new residents bring with them new incomes and increased purchasing power. What’s more is that these new residents spend a lot to get settled in, buying furniture and household supplies. The American Moving and Storage Association estimates that it cost the average household $4300 to move interstate. Atlanta ranks among the fastest growing metropolitan cities in the nation by the US Census Bureau; presumably, all those new people have been to IKEA.

3. New Industries Emerging in Georgia

Georgia’s film industry was nearly nonexistent a decade ago, and now, per the Department of Economic Developments, Georgia is ranked 3rd in film production nationwide, and 5th worldwide. This industry has a $7 billion-dollar economic impact and has been growing rapidly since the adoption of the film tax credit. The long-term film jobs created and out of state film crews coming to work in Georgia (and spending their money locally) generate lots of revenue for the state.

But film production isn’t the only new industry to appear in Georgia. The Craft Brewery industry has also rapidly grown in just the last few years and now supports at least 46 breweries, per Georgia’s Craft Brewery Guild, with more on the way. Those new businesses support jobs, encourage tourism, and incentivize consumers to spend their money in their local communities, all of which creates a cycle that supports increased tax revenue.

4. The Rise of the Sharing Economy

The Sharing Economy is usually defined as the sharing of goods and services through community-based online activity, with the dominate examples being sites like Uber, Lyft, and Airbnb, but also crowdfunding and online music streaming sites are both good examples of how large this new economic sector is.

Available data on the sharing economies impact in Georgia is limited, but its emergence and growth are hard to ignore. Per the Brookings Institute, the sharing economy is estimated to grow from its $14 billion level in 2014 to $335 billion by 2025.

It’s controversial to predict how much of a positive impact these companies will bring, as these sites are often not just creating jobs, but ending them as well. However, the claim that the sharing economy is supporting tax revenue increases has some support, although proper analysis is lacking. Airbnb released a report stating the 50 largest cities could boost tax revenue by $2 billion dollars, over the next ten years, through Airbnb alone. If analysis like that is accurate, the impact the entire sharing economy can have on Georgia’s tax revenue could be substantial.

5. Increased Business Investments

Georgia has also seen an improvement in its economy due to increased business investments. In the last couple months, among others, a global technology company announced it was investing $2.5 billion in Douglas County, creating 65 jobs. A manufacturing company in Douglas-Coffee County announced plans to spend $8 million, creating 100 new jobs. A food processing center in Hart County announced plans to devote $8 million, adding 130 new jobs.

While none of these investments alone may have a statewide impact, aggregated these investments have a major effect on Georgia’s economy. Per the Department of Economic Development, in 2016, Georgia saw $4.4 billion in business investments, which created 25,341 new jobs. Those new jobs bring both incomes and purchasing power to tax.

Furthermore, another type of business investment is the new people coming to Georgia, whether for tourism, to shoot movies, or to live. Those travelers create and support long-term network of service jobs around meeting the visitor’s needs.