A Georgia Senate committee Tuesday kicked off what could be a yearslong effort to eliminate the state’s income tax.
The committee heard testimony from advocates who say Georgia must eliminate its tax on personal (and possibly corporate) income to remain competitive with other states that plan to do the same. The most prominent voice at the committee’s first meeting was Republican Lt. Gov. Burt Jones, who noted legislators have already returned billions of dollars to taxpayers in recent years through tax cuts, rebates and other methods.
“But we must go further,” Jones told the Senate Special Committee on Eliminating Georgia’s Income Tax. “We must seize this opportunity to lead the South, not trail behind it.”
The committee also heard from Democrats concerned that eliminating the income tax will force Georgia to cut services or raise sales taxes that would adversely affect low- and middle- income people.
“The same people who favor lowering taxes want the ambulance to be there in four minutes when their loved one is having a health crisis,” said Sen. Nan Orrock, D-Atlanta. “That requires an investment.”
Tuesday’s initial committee hearing underscored what likely will be a major theme in Georgia political campaigns next year. Jones is running for governor on a pledge to eliminate the state income tax. Sen. Blake Tillery, R-Vidalia, who chairs the committee, is running for lieutenant governor. Other committee members include Senate Majority Leader Steve Gooch and Sen. John Kennedy — two Republicans also running for lieutenant governor.
Georgia legislators have been reducing the individual and corporate income tax rate for years — it will fall to 5.19% this year under a law signed by Gov. Brian Kemp in April, down from 5.75% in 2022. Those rate cuts have been made possible in part by big post-pandemic budget surpluses.
But eliminating the income tax altogether would be a tall order. The state expects to collect $15.7 billion in income taxes in the current fiscal year, plus another $3.3 billion in corporate taxes.
That makes the income tax by far the largest source of state revenue. The sales tax is a distant second at $9.4 billion.
Supporters say eliminating the tax will keep Georgia competitive with other states. According to the Tax Foundation, eight states do not levy an individual income tax.
But Grover Norquist, president of Americans for Tax Reform, told the Senate committee Tuesday that numerous states are cutting tax rates with an eye toward eventually eliminating income taxes.
Credit: arvin.temkar@ajc.com
Credit: arvin.temkar@ajc.com
Norquist said those states have continued to see rising tax revenue despite cutting tax rates because low tax rates attract more businesses and workers. He said some states have reduced rates by dedicating a portion of their surplus tax revenue to permanent tax relief — and keeping a tight rein on government spending.
Critics say eliminating the income tax would disproportionately benefit the wealthy. They say Georgians who earn less would pay a greater percentage of their income in higher sales taxes and fees or the state would be forced to cut services they depend on, like education or food assistance.
Orrock said Georgia already can’t meet residents’ needs for a variety of government services — needs that are likely to be exacerbated by federal spending cuts.
“We are tasked as government with meeting the needs of our population,” Orrock said.
But Tillery made it clear Tuesday that the committee’s charge is to figure out how to eliminate the tax — not debate whether to do it.
A likely target: billions of dollars in tax breaks. Georgia offers tax credits for film production and other industries, and consumers currently don’t pay sales taxes on dozens of personal services ranging from haircuts and health care. The committee could recommend eliminating some of those tax breaks to offset the loss of income tax revenue.
The committee is expected to report its recommendations in time for the General Assembly to consider them next year.
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