Despite federal prohibition, Georgia Senate panel backs income tax cut

State Sen. Chuck Hufstetler is chairman of the Finance Committee, which endorsed a $140 million state tax cut even though it may not comply with the federal COVID-19 relief plan that barred tax cuts. (ALYSSA POINTER / ALYSSA.POINTER@AJC.COM)
State Sen. Chuck Hufstetler is chairman of the Finance Committee, which endorsed a $140 million state tax cut even though it may not comply with the federal COVID-19 relief plan that barred tax cuts. (ALYSSA POINTER / ALYSSA.POINTER@AJC.COM)

Credit: Alyssa Pointer

Credit: Alyssa Pointer

Amid concerns that the federal COVID-19 relief bill temporarily outlawed tax cuts, a Senate panel Tuesday backed a measure to provide a state income tax cut for Georgians who use the standard deduction when they file their returns.

Earlier this month the state House overwhelming approved House Bill 593, which would cut what filers pay by reducing the amount of income the state taxes. So the measure could be one vote away from heading to Gov. Brian Kemp’s desk for his signature.

The bill’s sponsor, House Ways and Means Chairman Shaw Blackmon, R-Bonaire, told the Senate Finance Committee that HB 593 was “a modest and measured tax break for working Georgians.”

Congress put a provision into the federal $1.9 billion COVID-19 relief plan that passed last week saying money sent to states couldn’t be used for tax cuts, as some in Republican-led states had proposed.

“The purpose of this relief package is to provide aid to families and to people,” said U.S. Sen. Raphael Warnock, D-Ga. “If the state really wants to save money, it should take the $2 billion that I insisted on providing in this package to expand Medicaid.”

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It is unclear whether the prohibition on tax cuts would apply to HB 593, but Kemp was angered by the provision and House Speaker David Ralston, R-Blue Ridge, wrote President Joe Biden, the treasury secretary and Georgia’s congressional delegation asking the federal government not to stop the measure.

The tax cut would be relatively small — less than $100 for a married couple filing jointly — but would cost the state $140 million a year.

Under the bill, the standard deduction for a single taxpayer would increase by $800, for a married couple filing a joint return, $1,100. Georgians who are over 65 or blind would get an additional $1,300 deduction.

Danny Kanso, a senior policy analyst for the Georgia Budget and Policy Institute think tank, said the state could be docked $200 million over the next two fiscal years by the federal government if it passed HB 593. Instead, he suggested the state make direct payments to Georgians, which the relief act allows.

But Senate Finance Chairman Chuck Hufstetler, R-Rome, said he’s heard conflicting arguments about whether that would happen, and his panel showed no interest in stopping the bill.

Staff writer Greg Bluestein contributed to this article.

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