ATLANTA – The second phase of a state income tax cut Georgia Republicans launched two years ago cleared the state House of Representatives Tuesday.
Lawmakers voted 100-68 nearly along party lines to reduce Georgia’s individual income tax rate from 5.75% to 5.375%, effective next Jan. 1. The General Assembly approved the first phase of the tax cut in 2018, reducing the rate from 6% to 5.75%.
This year’s bill, which now moves to the Senate, also would offer a new earned income tax credit for income-eligible Georgians and triple the state’s tax credit for foster parents from $2,000 to $6,000 a year.
While Gov. Brian Kemp has expressed reservations about doing another tax cut this year because of the state’s tight finances, House Republican leaders have supported the reduction as fulfilling a promise they made to voters.
“It’s important that we keep our promises,” said House Ways and Means Committee Chairman Brett Harrell, R-Snellville, the bill’s chief sponsor.
House Democrats argued the state can’t afford another tax cut that would primarily benefit upper-income taxpayers. They also accused Republicans of low-balling the hit the tax cut would inflict on the state budget.
House Minority Leader Bob Trammell said the tax cut would eventually cost the state $600 million a year, not Harrell’s estimate of $98 million during its first year in effect and $250 million annually in the out years.
“This bill as is creates a hole in terms of revenue,” said Trammell, D-Luthersville. “We should go very slowly before we go into a change of this significant a nature.”
But Harrell said other legislation that would increase state revenues would help offset the impact of the tax cut. He pointed to a bill the General Assembly passed in January imposing the state sales tax on purchases Georgians make through third-party market facilitators including Amazon, and pending legislation that would prohibit taxpayers who itemize from deducting federal income tax payments from their state tax bill.
“We are not going to put the state, the citizens of Georgia and our valuable programs at risk,” Harrell said.
The income tax cut would apply not only to individual Georgians but to small business organizations including S-corporations, LLCs, partnerships and sole proprietorships. However, Georgia’s corporate income tax rate would remain at 5.75%.