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.
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Kemp was angered by the provision, and House Speaker David Ralston, R-Blue Ridge, wrote President Joe Biden, Treasury Secretary Janet Yellen and Georgia’s congressional delegation asking the federal government not to stop the measure.
Georgia Attorney General Chris Carr joined nearly two-dozen other GOP attorneys general in sending a letter to Yellen blasting the prohibition, and Ohio’s attorney general sued the Biden administration over the provision.
But the U.S. Treasury Department said Wednesday that the prohibition on tax cuts wouldn’t necessarily apply to those that didn’t use COVID-19 relief funds.
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.
Sen. Elena Parent, D-Atlanta, said lawmakers had talked for years about needing to do a host of things for Georgians, from providing rural areas high-speed internet service to increasing the number of people with health insurance. Instead, she said, Republicans pushed for a tax cut that could endanger federal funding if the feds end up challenging the measure.
But Senate Majority Whip Steve Gooch, R-Dahlonega, said the state can easily afford the modest tax cut.
“We’re not in a recession, our economy is growing, our budget is the highest it’s been in the history of our state, we have funds coming from D.C.,” Gooch said. “Why would we not want to give the money back to the people who sent it to us, to be good stewards of their funds? This is not our money, it’s their money.”
Parent said if the state wanted to do that, it could pass an earned-income tax credit to help low-income Georgians or make direct payments to people under the relief act, the same way the federal government is making payments to low- and middle-income families.
“There is a much smarter way to do it,” Parent said. “You can either do this and jeopardize hundreds of millions of dollars, or you could do it as a direct payment and still get the money.”