Governor will consider tax cut plans to address Georgia’s windfall

Gov. Nathan Deal announced Tuesday that he would consider working on legislation during this year’s General Assembly session to reduce the massive revenue windfall the state could receive from the federal tax plan that Congress passed in December.

Earlier the administration had said it wanted to leave the issue to lawmakers to deal with in 2019.

Deal told reporters Tuesday that he wants lawmakers to quickly approve legislation filed last week that would make relatively minor changes to the state tax code and exempt jet fuel from state sales taxes. That, he said, would allow Georgians affected by those changes to file their tax returns.

Then, the General Assembly could separately decide whether to do something about the estimated $3.6 billion state tax windfall over the next five years from the federal tax law.

Legislators have been critical of Deal’s initial plan to put off dealing with the windfall until next year, when the state would have a better indication of how much extra money the government will take in. Some of them also oppose the jet fuel exemption, which was killed in 2015 and will mostly help Delta Air Lines.

Deal said discussion about what can be done about the windfall will begin after state officials have firmer numbers on the impact. Some lawmakers have suggested cutting the state income tax rate — which the governor opposes without more study on its impact — while others want bigger tax credits for Georgians with children.

Getting a consensus won’t be easy, and the governor didn’t guarantee a windfall bill will pass during the 2018 session.

“We don’t have any specifics,” Deal said. “As soon as we get a little more comfortable as to the numbers we can rely upon, it is our hope we can work with the leadership of the General Assembly on a separate bill.”

The governor later added, “I am not promising we will (pass a bill), but I am hopeful we can come with a second bill.”

Lt. Gov. Casey Cagle, the president of the Georgia Senate and a candidate for governor this year, praised Deal’s support for looking to cut or eliminate the windfall.

“My commitment is to ensuring every additional dollar collected is returned back to hardworking Georgians,” Cagle said. “We will take full advantage of this opportunity to reform Georgia’s tax code — and I thank Governor Deal for his leadership on this issue.”

Last week, the administration filed House Bill 821 — an annual measure wedding changes in federal tax law to the state tax code. The bill had its initial hearing before a House subcommittee Tuesday.

Interest in what is typically a fairly routine bill was heightened after The Atlanta Journal-Constitution reported that the federal tax plan could result in a $3.6 billion windfall for the state over the next five years if no changes are made in state tax law.

With lawmakers running for re-election or seeking higher office this fall, such a windfall — which amounts to a state income tax increase on some Georgians — is unwelcome. Nobody wants to run on a state tax increase, especially when members of Congress will be running on a cut in federal taxes.

If the administration’s estimates are correct, Georgians would pay an additional $153 million in state income taxes this fiscal year, which ends June 30. That figure jumps to $758 million in the next fiscal year, which starts July 1.

That’s largely because the federal tax law limited or eliminated some of the deductions Georgians have used when figuring their state taxes in the past and made it far more likely that ratepayers will use the standard federal deduction, rather than lowering their state taxable income using itemized deductions.

So while many Georgians may pay less in federal taxes, at least some will wind up with bigger state tax bills unless lawmakers make some changes in the tax code.

Deal leaves office in January, and the question of what to do with the windfall would certainly become a major issue in this year’s campaign season if lawmakers made no changes. At least some legislators don’t want to wait until next year.

“We have seen the positive impact of the federal tax cuts,” said state Sen. David Shafer, R-Duluth, a candidate for lieutenant governor this year. “We need to build on that impact in Georgia with tax cuts of our own.”

The administration’s bill also re-creates a state sales tax exemption on jet fuel, something that was done away with in 2015 when Delta officials got on the wrong side of lawmakers.

Eliminating the state tax and some local taxes would amount to a break of about $50 million for airlines and cargo companies, said House Ways and Means Chairman Jay Powell, R-Camilla.

Airlines that fuel up in Georgia pay the fourth-highest tax in the country, with competing states such as Florida, North Carolina and Texas having no or lower taxes. Administration officials say they hope the savings in fuel taxes will persuade airlines such as Delta to provide more direct international flights.

Delta officials said fuel is the airline’s second-biggest expense — after personnel — amounting to about 20 percent of what the company spends.

John Hancock, the attorney for Clayton County, said the exemption would have a “catastrophic” financial impact on local governments. He said it would cost his county and school district $18 million a year in lost revenue and force locals to raise property taxes.

“You are passing a tax increase by passing this bill and giving Delta $18 million,” he said. “It is unfair to place an $18 million burden on the people of Clayton County in order to create an economic enhancement for a (corporate) citizen that had a profit of $2 billion last year.”

But lobbyists for the Metro Atlanta Chamber and the Georgia Chamber of Commerce, Southwest Airlines and Delta voiced support for the measure, saying it would help make Hartsfield-Jackson International Airport more competitive and could lead to more international flights.

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