Well, they did it. After going back and forth about how to address a projected $1 billion-per-year increase to state coffers from the federal tax reform, Georgia's top lawmakers said Tuesday they will do the right thing and cut the top income-tax rate. The announcement was made by Gov. Nathan Deal, Lt. Gov. Casey Cagle and Speaker David Ralston, with a host of House and Senate members at their side, indicating the bill should face little resistance.
Thus in this, the 16th year of GOP control at the Gold Dome, Republicans are finally delivering on their longstanding promise to reduce the top rate and keep pace with our neighbors and competitors.
The plan unveiled Tuesday will:
- double the standard deduction -- to $6,000 for married couples, $3,000 for single taxpayers and $4,600 for single/head of household filers -- effective this year;
- reduce the top income-tax rate (personal and corporate) from the 6 percent rate that has prevailed for decades to 5.75 percent, beginning in 2019; and
- reduce the top rate further, to 5.5 percent, in 2020 -- subject to approval by the Legislature and future governor at that time (which allows for adjustment in case the revenue increases don't materialize as projected for whatever reason).
The net effect of these changes will be to reduce revenues over the course of six years (fiscal 2018 through fiscal 2023) by a total of $516 million, or about one-half of 1 percent of projected revenues during those years. Instead of an anticipated state-tax increase of about $6.5 billion due to the federal reform, which broadened the tax base by limiting and eliminating some tax deductions, Georgians will see a bit of net tax relief.
While lawmakers are more than offsetting the $6.5 billion influx, the extra cut of $516 million shouldn’t be so large as to endanger the state’s AAA bond rating. In fact, because the 5.5 percent rate has to be “triggered” by further legislative action, there won’t be a cut at all if the projections about increased revenues don’t prove correct. And if they prove to have been understated, both the precedent and the mechanism will be in place for further cuts to the top rate.
The balance here was to improve Georgia’s incentives to work, save and invest via the tax code while maintaining the funding needed to address a rapidly growing population -- and the increased student enrollment, traffic congestion, etc. that brings.
This was a fine line to walk, but it appears they’ve done it.
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