ATLANTA – Two think tanks that have long been fixtures under the Gold Dome have reached dramatically different conclusions about a proposed $1 billion state tax cut before the General Assembly.
The Georgia Public Policy Foundation (GPPF) says the legislation, which the state House of Representatives passed March 9, would create tens of thousands of jobs and put more money in the wallets of a broad range of taxpayers.
The Georgia Budget and Policy Institute (GBPI) says most of the benefits would go to upper-income Georgians, while slashing tax revenues would threaten state funding of public education and health care.
The bill would set Georgia’s income tax rate at a flat 5.25%, down from 5.75%. It would eliminate the current standard deduction and replace it with a larger “standard exemption” of of $12,000 for single filers and $24,000 for married couples filing jointly.
House Bill 1437 also would eliminate most other deductions, with the exception of charitable contributions. The legislation would take effect Jan. 1, 2024.
The bill is the next step in reducing state income taxes the Republican-controlled legislature began after Congress passed federal tax reform in 2017. The General Assembly lowered Georgia’s income tax rate from 6% to 5.75% in 2018.
Lawmakers haven’t followed through with additional tax relief until now because of fears the state’s finances would plummet during the coronavirus pandemic. Instead, tax revenues have been on the rise, leading to this year’s push for another tax cut.
Reducing taxes by $1 billion would create more than 21,000 jobs in Georgia within five years of the bill taking effect, according to projections by the Beacon Hill Institute, a Massachusetts-based economics research organization the GPPF retained to analyze the legislation.
During that same period, the tax cut would generate $1.3 billion in economic impact, including $504 million in new investment. In addition, Georgians would have almost $2.4 billion more in disposable income, Beacon Hill found.
“Because of the reduction of the state’s top income-tax rate and the elimination of tax brackets, the reward for increased work and saving would rise, motivating investment and economic growth,” study co-authors David Tuerck and William Burke concluded.
Kyle Wingfield, president and CEO of the GPPF, which advocates free-market approaches to public policy, said the projected impacts of the tax cut are in keeping with the foundation’s philosophy.
“We’ve always been for broadening the tax base, getting rid of as many tax break incentives as we can and having a lower rate for everybody,” he said.
But an analysis by the progressive-leaning GBPI found that $620 million of the $1 billion tax cut would go to Georgians in the top 20% – earning more than $109,000 a year.
Only 62% of taxpayers would get a tax cut from the bill, while 28% would not see a change, and 10% would pay more in taxes, according to the Washington, D.C.-based Institute on Taxation and Economic Policy.
House Democrats used the group’s analysis to argue against the tax cut on the House floor.
“We are effectively raising taxes on the working poor,” said Rep. Matthew Wilson, D-Brookhaven.
The GBPI has urged Georgia lawmakers to pass a state-level Earned Income Tax Credit (EITC) as an alternative to the bill now before the legislature. A statewide poll the group released last summer found 70% approval for using some share of Georgia’s COVID-19 relief aid to create an EITC.
“The state currently has the option to better fund core services that promote economic opportunity or enact broadly popular tax cuts for low- and middle-income Georgians,” GBPI spokeswoman Caitlin Highland said.
A bill calling for a state EITC introduced last year with bipartisan support has failed to garner even a committee vote in the House.
The analysis the tax policy group conducted for the GBPI warned the proposed tax cut threatens the state’s ability to finance its long-term obligations, particularly when the huge influx of federal pandemic relief money goes away.
But Wingfield said the strong tax revenues flowing into the state’s coffers mean Georgia can afford to offer tax relief to its citizens.
“When the rainy-day fund is maxed out and you still have all this money left over, it’s a good idea to return it to the taxpayers,” he said.
The tax cut is now before the state Senate with a better-than-even chance of passing.
This story is available through a news partnership with Capitol Beat News Service, a project of the Georgia Press Educational Foundation.