The Georgia Senate decided Monday to let voters decide this fall whether to cut state income taxes in the future.
Under Senate Resolution 756, which passed the Senate 39-17, voters would decide on a constitutional amendment that would reduce the maximum state income tax rate from 6 percent to 5.8 percent over a few years if revenue continues to rise and the state has 8 percent of the previous year's tax collections in reserve.
That amounts to about $1.9 billion. Gov. Nathan Deal is hoping to build $2 billion in reserve before he leaves office in January 2019.
The measure is one of two sponsored by Senate Finance Chairman Judson Hill, R-Marietta, aimed at slashing state income taxes. His other legislation, House Bill 238, which is expected to be considered in the next few weeks, would — among other changes in the tax code — cut the income tax rate 10 percent.
If both the resolution and the bill pass, the top state income tax rate could dip from 6 percent to 5.2 percent.
“It’s time to put more money in Georgians’ pockets,” Hill told colleagues.
But state Sen. David Lucas, D-Macon, called the resolution unconstitutional because the Georgia Constitution mandates that revenue-related measures must start in the House.
Lucas said cutting income taxes would leave the state without the money it needs to deal with financial emergencies or catastrophes.
“You are going to have a Katrina one day and you’re not going to have the money to deal with it,” Lucas said.
Senate Minority Leader Steve Henson, R-Tucker, said: “This is bad public policy. You are showing the people of Georgia you don’t know how to govern if you pass this resolution.”
The resolution now goes to the House, where it will need a two-thirds majority to pass.
Gov. Nathan Deal warned lawmakers off any major tax-cut bills this session, and, other than Hill’s measures, there has been little talk of tax cuts this session beyond the usual special-interest breaks.
But state tax collections — and state spending — are at record levels, and some Republican lawmakers up for re-election this year may be feeling pressure to cut taxes after backing a $900 million fuel and hotel tax increase last year to pay for transportation improvements.
And late-session bids for major tax cuts — both for individual Georgians and corporations — have long been common.
Senate President Pro Tem David Shafer, R-Duluth, was behind a proposed constitutional amendment that capped the maximum state income tax rate at 6 percent in 2014, also an election year. Voters overwhelmingly approved that amendment. Shafer and Hill are longtime supporters of cutting, if not eliminating, Georgia's income tax.
Hill said his resolution could cost the state, and save taxpayers, more than $400 million if the triggers kick in and the rates are reduced.
“I think this shows we’re being fiscally responsible and we are ready to slow the growth in state government,” Hill said.
Robert Buschman, a senior research associate with Georgia State University's Fiscal Research Center, said Hill's other measure — HB 238, gutted House legislation that Hill repurposed — would cost the state $263 million in lost revenue in 2018. It would rise to $299 million in fiscal 2021.
That’s barely 1 percent of the money the state collects in taxes each year.
About $50 million would be lost by eliminating the state’s corporate net worth tax. He said more than 60 percent of businesses pay less than $100 a year in corporate net worth taxes.
The measure also would eliminate many itemized deductions Georgians receive when they file their income tax returns.
The Senate has yet to take up HB 238.
Wesley Tharpe, a senior policy analyst with the left-leaning Georgia Budget and Policy Institute, said Georgians already pay among the lowest state taxes in the country.
Under the plan, Tharpe said, personal income taxes for those earning less than $100,000 a year would drop less than $100. The wealthiest 1 percent of Georgia households would get a tax cut of nearly $2,850, on average, he said.
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