The Georgia Senate took another shot at reducing state income taxes Wednesday, voting to cut the top rate by 10 percent.
The Senate's passage of a repurposed House Bill 238 on a 35-17 vote was the second effort its made in recent weeks to cut income taxes. The chamber approved a proposed constitutional amendment about two weeks ago that would lower the top rate if the state meets certain revenue projections and builds up reserves.
House Bill 238, which began as a tax break for expanding Atlanta's aquarium, was converted into a 10 percent cut in the top state income tax rate — from 6 percent to 5.4 percent. It would also eliminate many deductions while keeping the full mortgage deduction for most Georgians. In addition, it would increase the personal exemption taxpayers can take and eliminate corporate net worth taxes.
Both the bill and the proposed amendment were sponsored by Senate Finance Chairman Judson Hill, R-Marietta.
Neither Gov. Nathan Deal nor House leaders have shown much interest in Hill’s proposals, even though lawmakers typically like to cut taxes, or at least talk about doing so, in election years.
Hill told colleagues Wednesday that 28 states have lower income tax rates than Georgia. He noted that the state’s budget and revenue are growing at a healthy rate, and he said the government can afford to let taxpayers keep more of their money.
“This is a modest, responsible measure to lower our income taxes,” he said. “This is the right thing for us to do to remain competitive.”
Democrats said the vast majority of the benefits in Hill’s bill would go to wealthy Georgians.
Senate Minority Leader Steve Henson, D-Tucker, said presidential candidates from both major parties this year have decried growing income disparities, and Hill's bill wouldn't help the situation.
“You are giving the richest Georgians a tax break, and working-class Georgians get little or no tax break,” he said. “A $2 tax cut for the lowest 20 percent (in income) versus a $2,000 tax cut for the top 1 percent isn’t equitable.”
Senate Minority Whip Vincent Fort, D-Atlanta, said, "We have a lot of problems in Georgia, and giving the majority of tax breaks to the wealthy does not solve those problems."
One of the reasons Deal has been skeptical of big tax cuts this year is that he is hoping to build state reserves to $2 billion by the time he leaves office in 2019. His staffers have raised concerns that cutting income taxes could have an impact on the state’s AAA bond rating, which allows Georgia to borrow money at low rates.
The Georgia Budget and Policy Institute, a left-leaning think tank, has raised similar concerns. Hill said that three states that charge no state income tax also have AAA bond ratings.
A fiscal analysis of the bill done by Georgia State University said it would cost the state — and save taxpayers — about $263 million in 2018, rising to $299 million in fiscal 2021. The institute said the cost could be closer to $400 million a year.
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