Georgians could see income, property tax relief in coming months

Georgia lawmakers began this year’s legislative session with big talk of eliminating individual income taxes and property taxes on homeowners.

What actually passed in the waning hours of the legislative session last week was much more modest. But political observers say many Georgia taxpayers could see a noticeable reduction in taxes in the years ahead.

Lawmakers agreed to trim Georgia’s income tax rate from 5.19% to 4.99% this year and approved a path for further reductions in the future. They also capped property tax assessments for primary residences at the rate of inflation and allowed local governments to use new sales taxes to pay for property tax relief for homeowners.

Those measures — combined with other income and property tax reduction initiatives — should begin filtering down to Georgians in coming months.

“The House and the Senate should both be proud,” Senate Appropriations Chairman Blake Tillery, R-Vidalia, said after the chambers gaveled out last Thursday. “We passed monumental, meaningful income tax reform. We passed meaningful property tax reform.”

Georgia political leaders made tax relief a top priority in an election year marked by lingering inflation and constituents’ concern about affordability. But House and Senate leaders had different priorities.

Lt. Gov. Burt Jones charged a Senate committee with finding ways to eliminate Georgia’s individual income tax. In January, the committee unveiled a sweeping plan to do that by trimming billions of dollars of tax deductions that some called “corporate welfare.”

Critics said that eliminating the state’s largest source of income would blow a $16 billion hole in the budget that was only partly filled by eliminating tax deductions.

The Senate approved one bill that would raise the standard deduction enough to eliminate the income tax for nearly two-thirds of Georgians, plus an alternative proposal that would eliminate the tax for about 15% of residents.

What passed last week was more limited — a continuation of Kemp’s preferred practice of gradually reducing the income tax rate. If Kemp signs House Bill 463, the rate would fall to 4.99% this year and to 3.99% over eight years if the state meets certain revenue targets.

Kyle Wingfield, president of the conservative-leaning Georgia Public Policy Foundation, welcomed that gradual approach. He said lawmakers have already reduced the tax rate from 6% to 5.19% in recent years.

“The state continues to just chip away at how much it’s taking out of people’s paychecks,” Wingfield said. “In any given year it may not feel like a lot. But when you look at what’s been done, it’s gone from 6% to 5%, and it’s now on a path to 4%.”

Critics say reducing the tax rate primarily benefits high-income Georgians. But HB 463 also raises the standard deduction for married couples filing jointly from $24,000 to $30,000 next year and the deduction for other filers from $12,000 to $15,000. It raises the deduction for each dependent from $4,000 to $5,000, and it would exempt up to $1,750 in cash tips and $1,750 in overtime income from taxation.

Those measures would benefit lower-income earners. Danny Kanso, a budget analyst for the liberal-leaning Georgia Budget and Policy Institute, called that a “silver lining.”

But he’s still concerned about the impact of the tax cut on the state budget. Though the bill does eliminate a few tax breaks, Kanso said it’s nowhere near enough to offset the lost income tax revenue. He thinks HB 463 could cost the state up to $2 billion a year in revenue.

While the Senate worked on lowering the income tax, the House spent much of the legislative session trying to eliminate property taxes for homeowners — a top priority of Speaker Jon Burns. Like the Senate’s income tax proposal, the House property tax proposal shrank to something more modest and passed as Senate Bill 33 in the final hours of the session.

The bill would cap the growth of individual property assessments on homestead properties at the rate of inflation. That could protect longtime homeowners from skyrocketing property tax bills.

But when a home sells, the new owner would be taxed at the current market value. That means the next owner of a home could pay substantially more in taxes than the previous owner.

SB 33 also would allow local cities and counties to use an additional penny sales tax to further reduce property taxes for homeowners, with voter approval. The Association County Commissioners of Georgia estimates that 110 counties and the cities within those counties could eliminate their homestead property taxes with an additional penny of sales tax.

But the portion of property taxes that funds local schools — about two-thirds of most peoples’ total tax bill — would not be affected.

Political observers said the bill would limit the property taxes of people who remain in their homes for decades, but not for new homebuyers or the owners of apartments and commercial properties.

“It’s probably going to be somewhat of a tax shift the longer this policy is in place, from the homeowners who have lived there the longest to everybody else, if house prices rise faster than inflation,” said Clint Mueller, deputy director at the Association County Commissioners of Georgia.