Planned Georgia income tax cut small change for many, report says

A new report says a proposed state income tax cut the Georgia Assembly is set to mull early next year would cost the state $550 million in revenue, while saving many taxpayers just $46 a year.

Georgia lawmakers are set to consider whether to lower the state’s personal and corporate income tax rate to 5.5% from 5.75% through 2025 during the legislative session that starts in January. If passed, the rate cut would mark a second reduction in two years after the state Legislature lowered the top rate in 2018 to 5.75% from 6%.

The biggest beneficiaries are at the upper levels of Georgia’s income ladder, says a Georgia Budget and Policy Institute Report released Monday.

The first cut followed on the heels of the federal Tax Cut and Jobs Act, passed in late 2017, which aims to reduce federal income taxes in Georgia by $43 billion through 2025, according to institute analyst Danny Kanso, the report’s author. Without new limits on ways Georgia taxpayers can itemize deductions, changes would have generated around $1.1 billion in new annual state tax revenues. Instead, the state Legislature opted to double the standard deduction and shave the tax rate by .25 percent.

A 5.5% tax rate, if passed, would hand “the middle 20% of Georgia households” just $42 in savings, according to GBPI’s report.

Potential decreased tax revenues could prompt government spending cuts or future tax increases to offset the losses so that the Legislature can pass a balanced budget, Kanso said. That could prove especially tricky as lawmakers decide how to fund an additional $2,000 pay raise for Georgia public school teachers and staff that Gov. Brian Kemp has promised on top of a $3,000 raise delivered this year.

“The state would be best served by preserving the strength of its largest and most dependable source of revenue,” Kanso said.

While the 2017 federal tax act reduces federal personal income levies for 88 percent of residents, the vast majority of tax cuts benefit upper-income households, Kanso said. In 2020, about 75 percent of Georgia’s total tax savings will go to households earning more than $108,000 annually. The 40 percent of Georgia households that earn less than $38,000 per year will collectively receive less than 6% of the total tax savings distributed across the state, Kanso said.