The Georgia Senate backed legislation Tuesday that would provide a $200 million income tax cut — mostly to upper-middle and upper-income earners — and that aims to force e-retailers to collect sales taxes on what they sell.
The vote sets up tax cut negotiations between the House and Senate that may not end until the final hours of the 2017 session, which is scheduled for a Thursday finale.
House Bill 329 passed the House as a flat 5.4 percent income tax rate for all Georgians, down from a top rate of 6 percent.
The Senate changed it to continue the current graduated system — which rises from 1 percent to 6 percent as a taxpayer’s income grows. It cut the top rate to 5.65 percent. It also would increase the personal exemption Georgians can claim by $300 per person.
Both the House and Senate versions of the bill would eliminate the ability to deduct your state income taxes paid from your adjusted gross income on your state return.
The Senate tacked on House Bill 61, which would force online retailers with at least $250,000 or 200 sales a year in Georgia to either collect and remit to the state sales taxes on purchases or send “tax due” notices each year to customers who spend at least $500 on their site.
Copies of the notices would go to the state Department of Revenue so it would know who owes at least some of the taxes.
Under the House version of the income tax bill, some single Georgians who itemize and earn up to $60,000, and some families earning up to $90,000, would pay higher taxes, said Senate Finance Chairman Chuck Hufstetler, R-Rome. He said that in the version the Senate passed Tuesday no one would see a tax increase.
Most of the benefit would still go to upper-middle and particularly upper-income Georgians.
A state analysis obtained by The Atlanta Journal-Constitution shows that under the Senate plan, the income tax provisions would save select taxpayers — and cost the state — $292 million in 2019, and that would rise to $526 million by 2022.
State Sen. Hunter Hill, R-Atlanta, called it a “pilot program” to see whether an even larger tax cut would help stimulate the economy.
But state Senate Minority Leader Steve Henson, D-Stone Mountain, urged colleagues to oppose the bill unless they can pinpoint where the state should cut spending to pay for it. He noted that lawmakers were willing to raise taxes a few years ago to pay for new roads and bridges, and he said Georgia needs to spend more on areas such as education.
“We should be able to have flexibility in our budget to address these challenges,” Henson said.
But Hufstetler said that at least some of the money the state would lose by cutting income taxes could be made up by what it brings in from the e-retail sales tax.
The e-retail issue is expected to wind up in court. But if the state is successful, one fiscal analysis suggests collecting those taxes could mean an extra $274 million in revenue for the state and $200 million for local governments. The combined figure could hit $621 million by 2022.
The Senate also voted 46-7 in support of House Bill 155, which would make music production companies eligible for tax credits in hopes of keeping talent in Georgia.
State Sen. Jeff Mullis, R-Chickamauga, called the measure a “jobs bill.”
But state Sen. Josh McKoon, R-Columbus, told colleagues the bill could amount to a state subsidy of up to $136 million a year for the music industry by 2022. McKoon said the money would be better spent giving all Georgians a tax break.
“All of us would like a tax credit,” McKoon said. “I am sure we could pick any industry we like and provide them with that kind of taxpayer subsidies and it would create jobs. But it makes it more and more difficult for us to provide the kind of broad-based tax relief we talk about.
“There is no one out in the hallway lobbying for the individual taxpayer.”
The Senate also approved a sales tax break for mobile cement mixers and tax credits for projects that revitalize rural Georgia downtowns.
The Senate vote in most cases just means the chambers’ leaders will negotiate the final form of the bills with the House before Thursday’s adjournment.
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