(Georgia Recorder) — House lawmakers signed off on a plan to incrementally reduce the state’s income tax rate over concerns from Democrats who argued the perk would disproportionately benefit wealthier Georgians.
The proposal, House Bill 1001, accelerates an already planned cut to the state’s income tax rate and is part of a series of reductions to the rate in recent years. Under the proposal, the rate would drop to 4.99% this year, down from the current rate of 5.19%, which is three years ahead of schedule.
The gradual cut also represents Gov. Brian Kemp’s preferred approach to tax relief at a time when other Republican leaders have pushed for more aggressive steps toward eliminating the income tax, which is a major source of revenue for the state. Kemp’s more moderate approach would cost the state about $750 million in lost revenues.
The governor has also proposed another round of one-time income tax rebates, which was temporarily sidelined during the legislative process but is in the final version of the mid-year budget that is now sitting on Kemp’s desk.
The governor sent a letter to House and Senate budget writers this week notifying them that he would add about $1.4 billion to this year’s spending plan to cover his priorities as well as the one-time property tax relief that GOP leaders in the House pushed to include in the current year’s now-$43.7 billion budget. That’s significant because only the governor determines the size of the budget.
“It allows us to make these essential, one-time investments while maintaining the proposed income tax reductions for this fiscal year,” Kemp wrote in the letter.
The income tax cut passed the House Wednesday with a 106-to-66 vote, with about a half dozen Democrats voting with Republicans. It now moves over to the Senate, which advanced a pair of income tax proposals earlier this month.
But some Democrats criticized the uneven benefit of the income tax reduction to Georgians, with the cut representing a bigger savings for higher income-earners.
“I’m not opposed to tax cuts. I’m opposed to the continued sanction of wealth inequality in our state,” said state Rep. Bryce Berry, an Atlanta Democrat, who argued that targeted tax relief would have more impact.
“Every dollar we cut without intention is one dollar we cannot invest in housing, in education and health care and opportunity. It’s a choice, and right now, we are choosing to widen a gap that is already too wide,” he added.
An analysis from the Georgia Budget and Policy Institute found that the top 1% of earners in the state would enjoy one quarter of the benefit while more than half of households would collectively see about 14% of the savings. Overall, about three-fourths of the cuts would go to those in the top 20% and out-of-state corporations, according to the analysis.
But proponents of the cut argued that since it is across the board all Georgia taxpayers would benefit.
“All Georgians are going to benefit from this. That’s going to put that much more money back into our state’s economy, that will also generate other revenues,” state Rep. Will Wade, a Dawsonville Republican and one of the governor’s floor leaders in the House, said to his colleagues Wednesday.
In his letter to lawmakers, Kemp said he supports the Legislature’s push to add $850 million for homeowner tax relief grants because “rapidly rising housing costs have put an additional pressure on many homeowners through higher property tax bills.”
