(GA Recorder) — Republican state leaders announced Monday that they plan to fast track a planned reduction of the state’s income tax rate.
Lawmakers passed a plan last year to gradually phase in reductions to the state’s income tax rate over time if certain economic markers are met. But with the state sitting on a massive surplus, Gov. Brian Kemp and legislative leaders say they want to jump ahead in the timeline for reductions.
Instead of dropping the rate to 5.49% as planned this coming year, GOP leaders will push to lower it to 5.39%. The proposal will need to go through the legislative process.
Currently, the state’s top rate is at 5.75%. The plan passed last year called for flattening and incrementally reducing the rate to 4.99% by 2029, but the planned cuts would be delayed if revenues are not on track to be at least 3% higher than the previous year.
Accelerating the timeline means foregoing more state revenue more quickly. The state’s income tax is a major source of revenue for the budget, generating about half of all the money collected to fund schools, law enforcement, health care for the poor and disabled, and a host of other services.
Going to 5.39% next year will shave off another $300 million in state revenues, bringing the total cost of next year’s tax cut to about $1.1 billion annually.
“That means in just one tax year will realize a cut of 36 basis points, keeping hundreds of millions of dollars in the pockets of hardworking Georgia taxpayers,” Kemp said. “This is what happens when you budget conservatively. This is what happens when you think long term rather than make knee-jerk fiscal decisions without consideration of the impact it will have on the state.”
The governor, who also took several shots at federal spending in his remarks, called the tax cut plan a “long-term commitment.”
Kemp stood with Lt. Gov. Burt Jones and House Speaker Jon Burns at the state Capitol during a press conference held as lawmakers meet for a special session to redraw Georgia’s political maps after a federal judge ruled that district lines created in 2021 dilute the voting strength of Black Georgians.
Monday’s press conference was billed as a “major announcement.” But some long-time critics of the plan said the proposed change will not make a significant difference for the average Georgia household.
For people earning between $42,000 and $73,000 a year, the proposal amounts to about another $27 in savings a year, said Danny Kanso, director of legislative strategy and senior fiscal analyst at the Georgia Budget and Policy Institute.
“That’s just a tiny drop in the bucket,” Kanso said Monday. “If we want to make a meaningful difference in the lives of most Georgia families, cutting the top income tax rate is just not the way to do it.”
Overall, with changes to the standard exemption factored in, middle-income earners stand to save about $200 a year. The state’s top 1% of high-income earners will save about $4,800 a year, according to GBPI’s analysis.
The state has wrapped up the last three fiscal years with a plump surplus and has socked away an eye-popping $16 billion in reserves. Revenues, though, have shown some signs of slowing.
Kemp has sent chunks of money back to taxpayers through one-time refunds this year and last year, a one-off property tax break and a tax suspension for people who drive gas-powered vehicles.
For the first time in years, the governor’s budget writers have given state agency heads the green light to ask for spending increases. The governor is set to unveil his budget next month when lawmakers return for the regular legislative session.
