Less than an hour after passing a state budget that included spending cuts, the Georgia House backed a plan Tuesday to cut the state income tax rate for the second time since 2018.
The measure, House Bill 949, which was approved 100-68, would cut the state income tax rate to 5.375% from a top rate of 5.75%. It now goes to the Senate.
House Speaker David Ralston, R-Blue Ridge, described the proposed rate cut as “keeping our promise” to Georgians.
Critics of the measure said about 90% of the savings would go to Georgians with six-figure incomes. They said 42% of the benefit would go to those earning more than $572,000 a year. Some middle-income families will pay higher state taxes under the plan, they added.
“This bill will make the rich richer and the poor poorer in this state and do nothing to help most of the constituents we serve,” said Rep. Sam Park, D-Lawrenceville.
“We should go very slowly before we proceed into a change of this nature, and we should think about who it benefits,” said House Minority Leader Bob Trammell, D-Luthersville.
But House Ways and Means Chairman Brett Harrell, R-Snellville, who pushed the measure, said the biggest cuts would go to high earners because they pay the most in taxes to fund state government.
“We are not going to put the state, the citizens of Georgia, the valuable programs we offer at risk at the same time reducing the burden of government on those who are paying for these wonderful programs,” Harrell said. “I am confident this measure is prudent, it’s measured, it’s fiscally responsible.
“It rewards those that are hardworking in this state with some small amount of tax reduction as compared to the burden we place on them.”
The vote — mostly along party lines — came shortly after passage of a $28 billion state budget that included cuts to state programs that lawmakers from both parties had decried. Democrats and some analysts have blamed those cuts on revenue slowdowns caused by a previous income tax cut.
If HB 949 becomes law, the rate would go into effect in January, meaning it wouldn’t have an impact on state revenue until after the upcoming budget year. When fully implemented, it would cost the state, and save some taxpayers, about $250 million a year, according to a state estimate.
The Georgia Budget and Policy Institute, an Atlanta think tank that opposes the bill, said it would reduce state revenue by $383 million and mean small income tax increases for 538,000 low- and middle-income households.
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%.
House Bill 949 would eliminate the current graduated tax rate system and set a flat rate for individuals of 5.375%.
Eliminating the graduated system of taxation — with some income taxed at 1%, some at 2%, some at 3%, etc. — means lower-income earners would pay higher rates on more of their income. However, the plan — which wasn’t revealed until Monday — includes a credit for some low- and middle-income families to help mitigate that, and a tripling of the tax break for those who adopt children.
Just lowering the rate would cost the state about $800 million, the institute said, something it would struggle to afford at a time when costs are rising and revenue growth has slowed.
But the cost to the state would be offset, somewhat, by other changes in tax law. For instance, the plan includes a provision that would eliminate the “double deduction” of state income taxes some Georgians can take on their tax returns. That change could raise taxes $130 million to $220 million on Georgians who itemize their deductions.
Harrell said it would prevent Georgians from deducting the state income taxes they pay on both their federal and state income tax returns. Under the measure, taxpayers could only deduct their state income taxes on their federal returns.
An Atlanta Journal-Constitution poll in January found that about 50% of voters favor keeping the current state income tax rate, against roughly 38% who want to see it cut again. An additional 9% said taxes should be increased. The remainder either said they did not know or refused to respond.
But this is an election year, and Ralston and Republican House leaders are fighting to maintain control of the chamber after Democrats picked up seats in 2018. Ralston has made it clear the tax cuts will be a campaign issue, saying, repeatedly, “Republicans cut taxes.” That has filtered down to Republican colleagues, who have used the line as well.
But Democrats were pushing back just as hard Tuesday, a sign that they will make an issue of who would benefit from the tax cut and who would pay more.
“This bill harms the little guy,” said House Minority Caucus Chairman James Beverly, D-Macon.
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