Almost a year after the COVID-19 pandemic sent the economy tumbling and forced Georgia lawmakers to reduce spending, a revenue recovery has state House leaders looking to cut state income taxes.
House Ways and Means Chairman Shaw Blackmon, R-Bonaire, filed legislation this week to increase the standard deduction Georgians can take when they do their income taxes. By reducing the amount of income taxed, House Bill 593 would cut what’s owed by millions of Georgians who use the standard deduction when they fill out their returns.
“It’s the fairest way to help the most people keep more of their money,” Blackmon said. “If we are able to afford it, we ought to let people keep some more of their money.”
While the tax cut would be relatively small — less than $100 for a married couple filing jointly — Blackmon said it would cost the state about $120 million a year. And, particularly if Congress passes a massive new $1.9 trillion COVID-19 relief package — which would include more state aid — a much larger state tax cut may be on the way.
None of that could have been foreseen last year, when lawmakers cut state spending by $2.2 billion because they feared tax collections would plummet due to the COVID-19 recession.
That didn’t happen. In fact, state tax collections have increased 6.3% during the first seven months of this fiscal year.
Blackmon said that was in part because of a bill lawmakers passed in January 2020 that helped the state increase sales tax collections from customers of internet- and app-based businesses, taxes that were already due but often not paid.
Under Blackmon’s bill, the standard deduction for a single taxpayer would increase by $800, for a married couple filing a joint return $1,100. Georgians over 65 or blind would get an additional $1,300 deduction.
Blackmon’s committee considers tax legislation, so it should have no trouble making it to the House floor for a vote. It also has the backing of House Speaker David Ralston, R-Blue Ridge, a big proponent of income tax cuts.
Just before the General Assembly suspended the 2020 session as the COVID-19 pandemic hit, Ralston pushed a plan to reduce the state income tax rate, a move that would have saved taxpayers $250 million. That tax cut went by the wayside because by the time lawmakers returned in June to finish the session, they feared revenue would plunge.
Ralston made cutting taxes a signature issue for House Republicans last fall as they worked to hold off Democratic attempts to retake control of the chamber in the November elections.
“I am proud to lead the House’s ongoing efforts to provide meaningful tax relief to Georgia families,” Ralston said Tuesday.
“As a growing and prosperous state, we have an obligation to be good stewards of the people’s money and return as much of it to them as we can,” he said. “Chairman Blackmon’s bill represents the next step in this process, and I look forward to his good work on this measure.”
While the General Assembly has backfilled some of the spending cuts it made in June, about $1 billion was not restored, including hundreds of millions of dollars reduced from school budgets. Some advocates also say there is a better way to get tax relief to Georgians in need.
“We understand and appreciate the desire to give relief to struggling Georgians by raising the standard deduction,” said Danny Kanso, senior policy analyst for the Georgia Budget and Policy Institute think tank. “However, though the bill will allow Georgians to save up to $75 per year in taxes and make a much-needed upward adjustment to the state’s low standard deduction, more is needed to move the needle for working families.”
The group has advocated for a state tax credit for “low and moderate” income families, which could be worth up to $500.
“It is the most effective tool for helping families during COVID and beyond,” Kanso said.
While Blackmon’s bill would cut income taxes for many Georgians, he also co-sponsored House Bill 594, which calls for charging sales taxes on digital downloads, including prewritten computer software, books, music and streaming services that have become increasingly popular as consumers look to move away from cable and satellite TV.
The measure’s sponsor, Rep. Kasey Carpenter, R-Dalton, told a House subcommittee Tuesday that if you buy a book at a store in Georgia, you pay a sales tax. If you download a book onto Kindle, you don’t.
Members of the House Ways and Means Committee have discussed taxing digital products for years, saying they wanted to update the state tax code, in part to help local stores that charge a sales tax on their products.
“While I am not someone who wants to raise taxes, I am someone who wants to level the playing field,” Carpenter said.
However, Kevin Curtin, lobbyist for AT&T, said the bill calls for a sales tax on streaming services while there is no sales tax on cable and satellite services. He said it was the equivalent of charging a tax on a service, and “in Georgia we typically don’t tax services.”
The subcommittee didn’t take action on the bill Tuesday.
Proposed tax cut
House Bill 593 would increase the standard deduction of income on tax returns from:
- $4,600 to $5,400 for a single taxpayer or head of household
- $3,000 to $3,550 for a married taxpayer filing separately
- $6,000 to $7,100 for a married couple filing a joint return
- $1,300 additional deduction for taxpayers 65 and over or blind
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