State and local governments in Georgia could see huge declines in tax revenues amid severe business disruptions prompted by coronavirus, according to research from Georgia State University.
Revenues from sales taxes could be down between $729 million and $1.27 billion for state and local governments over two to four months if Georgians continue abstaining from travel, restaurants, vacationing and certain kinds of work.
Meanwhile, the state’s gross domestic product (GDP) – a key indicator of economic health – could shrink between 2.4% and 4.1%, with several major industries in the state like airlines, hospitality, food services and entertainment taking on big losses.
Those findings came in a report released this week by researchers from GSU’s Fiscal Research Center. The researchers, Peter Bluestone and Robert Buschman, estimate tax revenue losses in areas like retail and motor fuel sales will continue to be steep as Georgia consumers and workers stay home.
“With many Georgians not currently working and most rarely leaving their homes for now, GDP will necessarily fall sharply in the second quarter,” the researchers write. “However, massive government assistance programs for individuals and businesses will, hopefully, limit the immediate damage and enable the economy to at least enjoy a U-shaped recovery later this year.”
“How soon, however, depends on science,” the report adds.
Restaurants, bars, barbershops and other popular gathering spots have been on lockdown in Georgia this month since Gov. Brian Kemp issued a statewide shelter-in-place order. Concerns over spreading the highly infectious virus have disrupted airline travel and vacation stays, both of which are important economic drivers in Georgia.
State lawmakers have already signaled they will need to overhaul Georgia’s budget after approving mid-year spending amounts for state agencies last month, shortly before suspending the 2020 legislative session. They will need to meet again before July 1 to hash out the 2021 fiscal year budget.
The GSU report estimated several scenarios for how deep social distancing may cut into Georgia’s economy, ranging from 25% losses in certain industries to 90% in others.
Four economic sectors including airlines, restaurants and hotels were analyzed in the report, accounting for losses that could collectively shave between $1.9 billion and $3.6 billion per month off the state’s GDP.
The shutdowns also are having a give-and-take effect on industries such as food services, the report notes. While restaurants are seeing major losses from in-person dining closures, sales at grocery stores are climbing.
Passenger screenings through U.S. airports like Atlanta’s bustling Hartsfield-Jackson Atlanta International Airport are down more than 95% compared to this time last year, while demand for planes to be used as cargo transport for medical supplies and equipment is on the rise, the report notes.
The situation now facing airlines drew comparisons to air traffic following the terrorist attacks on Sept. 11, 2001. Those attacks led to the creation of the Transportation Security Administration, which the report says restored confidence in commercial air travel safety.
“In the present case, it is not yet clear what signals will draw passengers back or when they will appear,” the GSU researchers write.
Other industries like hotels, restaurants and entertainment venues are seeing similar gashes in revenues, the report says. Double-digit declines in revenues totaling hundreds of billions of dollars could be in the offing for those industries, according to the report.