Flat tax proposal sails through Georgia House

House Ways and Means Chairman Jay Powell, R-Camilla, is sponsoring legislation to lower the top state income tax rate in Georgia. BOB ANDRES / BANDRES@AJC.COM

House Ways and Means Chairman Jay Powell, R-Camilla, is sponsoring legislation to lower the top state income tax rate in Georgia. BOB ANDRES / BANDRES@AJC.COM

The Georgia House overwhelmingly passed a measure Wednesday to cut the state’s top income tax rate, moving the measure to a Senate that has backed the idea in the past.

The House voted 126-40 for House Bill 329, which would set the state income tax rate for all Georgians at 5.4 percent. The state currently has a graduated system, with rates starting at 1 percent and rising fairly quickly to 6 percent.

The bill would also create an earned-income tax credit for low-income Georgians to make up for the higher rates they would pay, and it would eliminate a provision in state law that allows Georgians who itemize their deductions when they fill out their tax returns to write off their state income tax payments.

A report by the left-leaning Georgia Budget and Policy Institute said it would save Georgians about $154 million a year, with three-quarters of that savings going to those earning more than $97,000 a year.

The report said under the bill, some single low-income Georgians would wind up paying higher income taxes, while low-income families would pay less.

The state’s calculations put the savings at a much more modest $78 million over four years.

The Georgia Senate approved legislation last year to cut the top tax rate from 6 percent to 5.4 percent, and Republicans have long pushed for a lower flat income tax.

“It seems like it’s always been talked about,” said Jay Morgan, a longtime GOP activist and lobbyist. “It’s one of those bumper-sticker issues people want to be associated with, particularly people who might want to run for higher office.”

When asked how it will do in the Senate, state Sen. Hunter Hill, R-Atlanta, the chamber's Finance Committee vice chairman, said, "I would think it has a good chance."

Hill said he’d like to see some changes made in the section dealing with low-income working families.

Wesley Tharpe, the research director of the Budget and Policy Institute, said his organization has long supported the low-income tax credit for poor Georgians.

But he added, “The flat tax that is the core of the bill is a big defect.

“Flat taxes inherently lead to higher income tax bills for low- and moderate-income people because they are paying a higher rate,” Tharpe said.

Kelly McCutchen, the president of the conservative Georgia Public Policy Foundation and a longtime proponent of the change, said the bill’s chances in the the Senate should be “outstanding.”

“Usually the push for this has come from the Senate,” McCutchen said. “I would think the chances of getting tax reform this year are the best I have seen in a decade.”

McCutchen called House Bill 329 "pro-growth tax reform."

Tharpe’s group says the “growth” would be in the wallets of Georgia’s top earners. Those Georgians also currently pay the most in state income taxes.

The institute estimates that taxpayers who make at least $536,000 a year would claim 37 percent of the tax cut — each receiving about $2,575 per year.

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