Georgia House leaders proposed lowering the state’s income tax rate and raising the standard deduction, estimating the move would save taxpayers about $1 billion a year if their plan is implemented.

House Speaker David Ralston, R-Blue Ridge, and other House leaders announced the legislation Tuesday at a Capitol press conference.

“We believe it is a core principle that government must live within its means, that there is no such thing as government money, but that it belongs to Georgia taxpayers,” Ralston said. “Make no mistake: We are committed to running a lean government while providing the necessary services to keep Georgia a growing, thriving state.”

House Ways and Means Chairman Shaw Blackmon, a Republican from Bonaire and sponsor of the proposal, said, “It’s simple, fair and allows Georgians to keep more of their money.”

The Republican leadership was expected to seek a tax cut this year with all 236 General Assembly seats up for election. Ralston has also long been a proponent of cutting the state’s income tax rate.

If the House bill passes, it wouldn’t take effect until 2024, so budget writers would have time next year to figure out how to make up for the loss of tax revenue.

Under the House measure:

As with any lowering of tax rates, the biggest beneficiaries would be top income earners. They would pay a smaller percentage on their higher earnings. However, Ralston’s office estimates 95% of Georgians would pay less in taxes under the plan.

House leaders said it would be the biggest income tax cut in state history.

Lawmakers voted in 2018 to reduce the top state income tax rate from 6% to 5.75% in response to federal tax changes that, officials thought, would force many Georgians to pay higher state taxes.

The first cut, in 2018, saved Georgians more than $500 million.

The 2018 legislation set up a second vote, in 2020, to lower the rate again to 5.5%, but then COVID-19 hit, the General Assembly session was suspended and the state faced a brief recession.

The state’s economy rebounded nicely, in part because of waves of federal COVID-19 relief money that was approved by Congress almost as soon as the nation’s economy shut down to fight the pandemic.

The state ended fiscal 2021 with a $3.7 billion surplus, and Gov. Brian Kemp, who is facing a tough reelection battle this year, has proposed refunding $1.6 billion of that surplus to taxpayers. The House passed a bill Tuesday calling for the refund. It is expected to overwhelmingly pass the Senate as well.

Tax collections are running 17.9% ahead of last year for the first seven months of fiscal 2022, and Kemp and lawmakers have backed a massive spending increase this year, including pay raises for 300,000 teachers, school, university and state employees.

In typical years of economic growth, the state sees an increase in tax revenue of about $800 million to $1 billion. So hypothetically, the tax cut House leaders are proposing would eat up most if not all the revenue growth used to fund school enrollment and health care expenditure increases in the annual midyear budget.

But House Appropriations Chairman Terry England, R-Auburn, said the revenue increase has been picking up in recent years “in that you are seeing more growth than what the need is.”

Danny Kanso, senior policy analyst at the left-leaning Georgia Budget and Policy Institute, was more skeptical of the proposal, noting that less than two years ago the General Assembly had to cut spending 10% because of slow collections.

“The recent volatility in Georgia’s revenue collections that only months ago forced billions in budget cuts demonstrates the necessity of preserving our state’s ability to fund health care and public education, without overtaxing low- and middle-income families, who are disproportionately people of color,” Kanso said.

What the tax plan would do:

Source: House Speaker David Ralston’s office