A key lawmaker has cast further doubt on the prospects of another Georgia income tax cut in a year when serious cuts to mental health, criminal justice and other state services are being considered.
“I don’t see the math there right now without some changes to the budget to do it,” state Sen. Chuck Hufstetler, a Rome Republican who chairs the Senate Finance Committee, told a crowd gathered Friday at the Georgia Freight Depot for Georgia Budget and Policy Institute conference.
In 2018, legislators lowered the state’s top income tax rate from 6% to 5.75% in anticipation of a potential windfall resulting from federal tax law changes. Instead, the state has seen sluggish revenues.
Even so, the 2018 vote teed up another potential one-quarter point cut for this year, which would dock the state budget another $500 million in revenue.
Hufstetler’s comment came just one day after the head of the Department of Behavioral Health and Developmental Disabilities described “painful” cuts that would affect services for some of Georgia’s most fragile residents.
Gov. Brian Kemp’s proposed $28.1 billion budget counts on receiving income tax revenues at the current level. His spending plan includes cuts, but it also adds $360 million to teacher pay.
Hufstetler said he is focused on raising new revenues to avoid some of the proposed cuts. The General Assembly passed a bill in the first week of the session that requires online third-party vendors to collect and remit sales taxes. The measure targets retailers, rideshare companies and others that transact business over apps or the web, although there’s lingering debate over what riders of Lyft and Uber should pay.
A state estimate on an earlier draft of the bill put the value of an online tax at a $160 million per year, counting both state and local sales taxes. An advocacy group’s estimate put it at as much as $750 million.
“We’re not collecting the sales tax we should be getting,” Hufstetler said. “The sales tax used to be 31% of our budget. Now, it’s 25%. It’s not like people buying are less in Georgia. We’re not collecting the money that should be there.”
Hufstetler said there are also plans to revive a proposal that would require reviews of the economic benefit of some tax breaks. Kemp vetoed such a bill last year, but Hufstetler said lawmakers were working to address the governor’s concerns about who would be tasked with auditing the programs.
The state Senate’s finance chairman also plugged a tax hike for tobacco products, but any proposed tax increase on cigarettes and more traditional tobacco products will face an uphill battle in the House. There is also discussion about expanding the state tax to include vaping products.