Gov. Brian Kemp signed two bills Monday that will hand Georgians a slight income-tax cut and let foster parents tap into a larger tax credit when adopting children.
The governor, who has helmed the state’s response to the COVID-19 pandemic for a year now, called the two tax measures a boon for struggling Georgians and foster parents that looked financially “unthinkable” last March as the virus spread.
“As we return to normal here in the Peach State and look to fully restore our economy, it is critical that Georgians keep as much of their hard-earned money as possible to revive small businesses and industries still struggling under the weight of [COVID-19],” Kemp said at a bill-signing ceremony.
The tax-cut bill, sponsored by Georgia Rep. Shaw Blackmon, R-Bonaire, allows Georgians to pay less income tax starting July 1 amid a rebound of the state economy during the pandemic.
The state’s standard deduction for married couples who file joint returns will increase by $1,100. Single taxpayers can deduct an extra $800, while Georgians ages 65 and older can deduct another $1,300. Married couples filing separately will be able to deduct an additional $550.
House Speaker David Ralston, R-Blue Ridge, who has pushed to continue cutting taxes after Georgia lowered its income-tax rate from 6% to 5.75% in 2019, said Monday the latest cut aims to benefit primarily lower- to middle-income families across the state.
“Today marks another chapter in Georgia’s continuing commitment to provide sustainable, meaningful tax relief to Georgians to let them keep more of their hard-earned money,” Ralston said.
Critics have warned the income-tax cut would be a drop in the bucket of less than $100 in savings annually for all categories of taxpayers, while potentially jeopardizing millions of federal dollars set to arrive in the recently passed $1.9 trillion COVID-19 aid package.
Since the aid package bars states from lowering taxes while using the emergency aid money, Georgia could stand to lose nearly $200 million over the next two years by putting the income-tax cut into effect, according to Danny Kanso, senior policy analyst with the nonprofit Georgia Budget and Policy Institute.
The tax cut passed last week out of the state Senate by 35-15 vote with nearly all Democratic lawmakers voting against it due to concerns over the federal COVID-19 aid restrictions.
Top state Republicans including Kemp and Ralston have slammed the Biden administration over the aid package’s tax-cut penalties as well as its funding formula, which they argue benefits larger Democratic-run states like New York and California at the expense of Georgia.
However, Ralston on Monday said U.S. Treasury Secretary Janet Yellen had signaled the federal officials “will dramatically curtail” the tax-cut restrictions in the relief package amid pushback from Republican leaders in several states.
Separately, the tax-credit bill sponsored by Rep. Bert Reeves, R-Marietta, drew less controversy as it sped through both chambers of the General Assembly.
Reeves’ measure will boost the annual tax credit for new foster parents from $2,000 to $6,000 annually for the first five years after adoption, then drop back to $2,000 per year. The credit will end when the foster child turns 18.
Clearing hurdles for foster care in Georgia has been a legislative priority for many state leaders including Kemp and Lt. Gov. Geoff Duncan, who on Monday called the increased tax credit a “real and substantial” incentive for families to adopt some of the state’s most vulnerable children.
“It’s going to remove barriers and hurdles for families that are just sitting on the precipice of being able to make the decision to bring on those kids,” Duncan said.
The number of Georgia children in foster care has declined over the past three years but remains high, according to state Division of Family and Children Services data. The state currently has about 11,200 children in foster care, down from 15,000 in March 2018.