Kemp signs $1 billion tax cut bill in his GOP challenger’s home county

Kemp visited the White Diamond Grill in Bonaire — one of Perdue’s favorite eateries — to sign legislation ready-made for the campaign trail, a measure to gradually drop the state’s income tax rate from 5.75% to 4.99% by the end of the decade.

“This is designed to put more money into hardworking Georgians’ pockets,” Kemp told reporters, state lawmakers, supporters and local officials who packed into the cinder-block diner.

Lt. Gov. Geoff Duncan, who attended the bill-signing ceremony, said, “Nothing screams conservative louder than a good old-fashioned tax cut.”

Kemp also used the trip to participate in an economic development announcement in Perry with his political patron and Perdue’s cousin, former Gov. Sonny Perdue.

Sonny Perdue, who is from Bonaire, appointed Kemp to serve as secretary of state in 2010. Kemp recently helped engineer Sonny Perdue’s selection to head the University System of Georgia, a $524,000-a-year gig.

While the symbolism was obvious — the Perdue family has deep roots in Houston County — there was also substance: Cutting the income tax rate to 4.99% by 2029 could eventually save Georgians more than $1 billion a year.

Standard exemptions will rise gradually as well. The standard exemption will eventually go from $2,700 for single filers to $12,000. For married couples filing jointly, it will go from $7,400 to $24,000.

As is mostly the case when lowering tax rates, the biggest beneficiaries will be top income earners. They will pay a smaller percentage on their higher earnings. But supporters say pretty much everyone will see something out of the tax cut.

The measure delays 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. So if the state economy slows, it could be 2030 or later before the rate hits 4.99%.

Once fully implemented, House Ways and Means Chairman Shaw Blackmon, R-Bonaire, said the measure will 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.

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, and lawmakers approved refunding $1.1 billion of that surplus to taxpayers last month.

Tax collections are running 18.9% ahead of last year for the first nine months of fiscal 2022, and Kemp and lawmakers backed a massive spending increase this year, including pay raises for 300,000 school, university and state employees.

In years of more typical economic growth, the state sees an increase in tax revenue of about $800 million to $1 billion. So hypothetically the tax cut would eat up a big chunk of the revenue growth used to fund school enrollment and health care expenditure increases in the annual midyear budget.

Senate Finance Chairman Chuck Hufstetler, R-Rome, who helped write the tax bill that Kemp signed Tuesday, said: “This is a historic moment in Georgia. This is only the second income tax rate cut since it was put in, in 1937. It’s something to be proud of.”

A majority of Democrats in the General Assembly voted for the tax cut, but the state party criticized the move.

“Brian Kemp’s shift to a flat income tax is a boon for the wealthy, and stands consistent with his record of serving the well-off and well-connected while leaving behind working Georgians by opposing Medicaid expansion and cutting funding for public schools,” U.S. Rep. Nikema Williams, chairwoman of the party, said in a statement.

“The change comes as the current governor faces a nasty primary challenge from David Perdue, who wants to abolish state income tax entirely,” she added. “Today’s bill signing raises the important, and still unanswered, question: does Kemp stand with Perdue’s call to eliminate the state income tax?”

The income tax supplies the state with more than half of its revenue for schools, roads, policing, prisons and dozens of other programs. Senate President Pro Tem Butch Miller, R-Gainesville, a candidate for lieutenant governor, filed legislation to eliminate the tax but didn’t explain how the state would make up the lost revenue. The bill was never voted on.