A new Republican proposal to alter the state’s tax system gives more protection to middle-class filers who might have paid more in income taxes under a version of the plan pulled from consideration last week.
Critics say the new plan would leave the state with a $220 million budget hole to fill when the Legislature convenes next year.
“It’s deciding that we don’t want to do Meals on Wheels. It’s deciding that we don’t want to pay for school buses. We’re not the federal government -- $200 million has a real impact on people’s lives,” House Minority Leader Stacey Abrams, D-Atlanta, said Wednesday. “There is very few places where we have that big a number where we can cut.”
The Atlanta Journal-Constitution obtained details of the plan from a document prepared by the state auditor.
“It’s an incredible balance, but the goose that laid the golden egg in America is free markets and capitalism," he said. “The first [goal] is to make Georgia the most attractive place for the entrepreneurial spirit.”
GOP leaders spent weeks putting together a tax bill that would lower the personal income tax rate from 6 percent to 4.5 percent, while shifting taxes to things such as auto repair services and a new tax on communications. Last week, Abrams punched a hole in the plan with an analysis showing average middle-income earners would pay hundreds more in taxes while high-income filers would gets thousands in tax breaks. The plan would do away with most deductions but offer a lump-sum deduction that cuts off based on income.
Republicans lawmakers pulled the plan back, delaying a planned vote in the House, to salvage tax reform before the end of the session.
The tax council that originally developed recommendations for reform intentionally built their plan to be neither a tax increase nor decrease. Senate Majority Leader Chip Rogers, R-Woodstock, said this new plan does not raise taxes on anyone, which was the GOP goal.
“One thing we assured Georgians was that it was not going to be a tax increase,” he said. “What we are going to be looking at in a final version is going to be a pretty good tax cut.”
The new plan attempts to protect middle-class taxpayers by extending a lump-sum deduction to earners with federally adjusted gross incomes of $80,000 for single filers and $160,000 for joint filers. It also phases in a new tax break for manufacturers over three years to minimize the hit to state revenue.
The result is a tax cut for every taxpayer, Rogers said.
“One way to grow Georgia’s economy is to keep more money in the private sector," he said.
Other portions of the tax plan remain largely intact, including a communications tax of 7 percent, which would tax satellite television and some telephone services currently untaxed. The plan also would freeze the retirement income tax exemption at its current level of $35,000, among other changes.
"It's about how do you buy votes with a tax cut they cannot afford," he said. “At this point, it is better to do nothing than what they are proposing."
The plan may create a few jobs, but it will come at a cost of hundreds of millions for state services, he said.
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