Georgia House Speaker Jon Burns and fellow Republican leaders on Wednesday announced plans to push a package of bills to speed up cuts to the income tax rate and provide new property and child tax breaks.
Combined, if approved, the legislation could save Georgians hundreds of millions of dollars in taxes, officials said.
“Taken together, these bills will provide significant relief to taxpayers across the state, put more money back into their pockets and continue to boost our economy,” Burns said at a Capitol press conference.
With the state sitting on a mountain of reserves, Gov. Brian Kemp and legislative leaders last month announced they wanted to speed up implementation of a law passed in 2022 to reduce the income tax rate in Georgia. Under that law — passed as House Bill 1437 — the rate would gradually drop from 5.75% to 4.99% by 2029. It also gave Georgians bigger exemptions when they file their tax returns.
The rate dropped to 5.49% on Jan. 1, but Kemp, Burns and legislative leaders want to bump it down to 5.39% this year. If approved, that change alone would save Georgians about $300 million annually in taxes, Kemp said.
Individual income tax collections make up about half of the money the state uses to pay for schools, public health care programs, policing, prisons and dozens of other things.
The Atlanta Journal-Constitution reported in October that the state ended fiscal 2023 on June 30 with $16 billion in “rainy day” and undesignated reserves, nearly enough to run state government for six months if it had no other income.
During the previous two years, Kemp and lawmakers have approved income tax rebates, giving back $250 to $500 to Georgians. Last year they also approved a property tax break. And Georgians saved about $2 billion from two suspensions of the state gas tax, the first of which began in March 2022.
Once fully implemented, House Ways and Means Chairman Shaw Blackmon, R-Bonaire, has said the changes would save a family of four with an income of $75,000 about $650 a year.
Lawmakers voted in 2018 to reduce the top state income tax rate from 6% to 5.75% in response to federal tax changes that officials thought would force many Georgians to pay higher state taxes.
The first cut, in 2018, saved Georgians more than $500 million a year.
The 2018 legislation set up a second vote, in 2020, to lower the rate again to 5.5%, but then COVID-19 hit, the General Assembly session was suspended and the state faced a brief recession.
The state’s economy rebounded nicely, in large part because of waves of federal COVID-19 relief money that Congress approved almost as soon as the nation’s economy shut down to fight the pandemic.
Because of that, the state ended fiscal 2021 with a $3.7 billion surplus. The next year the surplus hit about $6.6 billion, and in fiscal 2023 it topped $5.3 billion.
Besides the income tax rate cut, which will go through Blackmon’s committee, the House plan would raise the state income tax deduction for children from $3,000 a year to $4,000 a year. It would also double the standard state homestead exemption on property from $2,000 to $4,000 a year.
House staffers said combined, those two provisions would save Georgians about $250 million a year.
The legislation would additionally remove a limit on how much the state can sock away in “rainy day” reserves meant to help pay for government services in a financial crisis. Currently the state can put 15% of the prior year’s reserves into the fund, which is currently full at about $5.3 billion.
Because of that limit, Kemp has used the surpluses to build up a separate reserve fund that, this session, he wants to spend partially on major building and renovation projects. Even after that, the fund will have billions left over.
Lt. Gov. Burt Jones, the Georgia Senate’s president, called the House package “a good start.” Jones has backed phasing out the state income tax, which would likely mean expanding or raising state sales taxes to make up for the loss of revenue.
“I think we can always do more to provide the much-needed tax relief to Georgians,” Jones said.
Credit: TNS
Credit: TNS
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