The Georgia Senate on Friday supported gradually lowering the state’s income tax rate from 5.75% to 4.99%, one-upping the House, which earlier this session also backed a reduction.
The Senate rewrote House Bill 1437, which would have cut the income tax rate to a flat 5.25%. The Senate version passed 51-4.
The original House bill would save taxpayers $1 billion a year. The Senate version would eventually save a similar amount, but it would take several years.
Under the Senate version, the income tax rate would gradually fall to 4.99% for everyone. In the first year the measure would take effect, 2024, the first $20,000 of income earned by a Georgia couple would be taxed at the lower 4.99%. Personal exemptions would also be increased.
Senate Finance Chairman Chuck Hufstetler, R-Rome, said the Senate version would also include an income tax credit to help lower-income Georgians.
Critics of the House version said 500,000 families would pay higher taxes under its plan because of other changes it made in tax law. Hufstetler said under the Senate version almost nobody would pay higher taxes.
The Senate measure would delay the phase-in of lowered rates any year the state doesn’t have enough money in reserve to pay for it, any year state tax collections don’t grow at least 3% or if collections are lower than any of the five previous years.
“This is a good tax cut that has been vetted out with the state economist and others,” Hufstetler said. “I think this is a responsible way to do it.”
The Senate proposal initially also capped how much the state would spend in the future on the film tax credit at $900 million a year. Probably more important for the industry, it would eliminate the ability of film companies to sell their tax credits.
Those provisions only lasted a few days as the film industry and its supporters worked against them. The Senate Rules Committee took them out of the bill Thursday.
The Senate and House will now negotiate a final tax cut plan. The 2022 session ends Monday.
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