ATLANTA (GA Recorder) — Lawmakers signed off on a compromise plan late Monday to gradually cut the state’s income tax rate over several years.
The income tax rate would flatten and drop to 5.49% starting in 2024, a major shift away from the state’s current six-step rate system that tops out at 5.75%. It would then continue to decline until reaching 4.99% five years later – but only if state revenues continue to grow.
The two chambers had pushed forward competing visions for how lawmakers should go about cutting the rate, but a compromise remained elusive until Monday, which was the final day of this year’s legislative session.
“That’s the third time we’ve cut taxes here in the last four or five years, and so I think that says a lot about the way we’ve managed to get through this tough time,” House Speaker David Ralston told reporters early Tuesday morning.
The tax break was a priority for GOP state officials whose political rivals are campaigning for the complete elimination of the income tax, which funds about half the state budget. Proponents have also argued the rate needed to be lowered to make Georgia more competitive with neighboring states.
But the House proposal collided with concerns in the Senate that it would raise taxes for about a half-million Georgians.
“We see savings across the board. In fact, we haven’t been able to find anybody who pays anymore at all. Everybody either pays zero or less,” said Rep. Shaw Blackmon, a Bonaire Republican who chairs the House Ways and Means Committee.
The plan would roll taxpayer deductions into a higher standard exemption and eliminate the state’s double deduction, Blackmon said.
But the proposal drops an earned income tax credit proposed in the Senate to provide relief for lower income residents. The Senate had also dropped a proposal to add limits to the film tax credit program, such as a $900 million cap on the program, partly as a way to soften the blow to state revenues.
Blackmon said the proposal would save taxpayers $1 billion. But a left-leaning think tank, the Georgia Budget and Policy Institute, put the price tag at closer to $2 billion.
Danny Kanso, senior policy analyst with GBPI, said the proposal still disproportionately benefits wealthier Georgians. With the 4.99% rate, the average annual tax cut for the first 60% of tax filers would be less than $200, according to GBPI. The top 1% would see a nearly $10,000 tax break.
“Yet again, lawmakers are skewing the tax code so that the wealthy get massive tax cuts and would not have to pay their fair share, but only paying lip service to support for low- and middle-income families,” Kanso said.
