State income tax cut will go into effect on January 1
A tax cut worth $1 billion, which was passed by the Republican-controlled General Assembly last year, will be implemented on New Year’s Day.
The state income tax rate for 2024 has been reduced to a flat 5.49%, down from the current 5.75%, as part of the phased-in tax cut. This reduction will continue each year, reaching 4.99% by 2029.
Earlier this month, Gov. Brian Kemp made an announcement stating his intention to request lawmakers to expedite the reductions by one year. Should legislators agree, the tax rate for 2024 will be set at 5.39%.
Supporters argue that broad-based tax cuts are a more effective strategy for job creation compared to the various tax credits and exemptions that the General Assembly has enacted for specific industries over time.
According to Kyle Wingfield, president and CEO of the Georgia Public Policy Foundation, a think tank focused on advocating free-market approaches to public-policy issues, implementing broad-based policies eliminates favoritism and removes politics from the equation.
According to Wingfield, the implementation of targeted tax relief does not provide any advantages to emerging industries that policymakers may not be able to predict.
“When you take a more targeted approach, you provide tax relief to specific companies or industries that you are already familiar with,” he explained. “On the other hand, when you opt for broad-based tax relief, you are incentivizing individuals who are currently in the process of creating the next big company that will eventually become a major employer.”
In the 2022 legislative session, the tax cut proposed by Kemp gained immense popularity, with all 236 seats in the Georgia House and Senate being up for election. It received overwhelming support, as only two House Democrats voted against it on the final day.
Thirteen Democrats in the 56-member state Senate voted against the bill. They pointed to an analysis conducted by the Georgia Budget and Policy Institute, a left-leaning organization. According to the analysis, House Bill 1437 would result in a tax increase for approximately 10% of taxpayers. Additionally, it revealed that $620 million out of the $1 billion tax cut would primarily benefit the top 20% of taxpayers.
According to then-Democratic Representative Matthew Wilson of Brookhaven, the taxes on the working poor are being raised effectively.
Wilson initially opposed the bill when it was first presented in the House. However, on the final day of the session, he changed his stance and voted in favor of it.
Republicans countered the argument that the bill would increase taxes for low-income Georgians.
“We haven’t found anyone who offers higher payment rates,” stated House Ways and Means Committee Chairman Shaw Blackmon, R-Bonaire, the primary advocate of the bill, during his speech on the House floor when the bill was successfully passed. “This plan ensures that everyone pays zero or even less.”
Kemp urges General Assembly to accelerate tax cut by moving up the state income tax rate reduction from 2025 to 2024.
Georgia has more than enough funds to support the acceleration of tax relief. Over the past few years, the state has accumulated a surplus of $16 billion, with $11 billion being undesignated.
In announcing the proposal earlier this month, Kemp expressed his confidence in the state’s conservative budgeting and robust economy, which is supported by business-friendly policies. He emphasized the importance of redirecting funds back into the pockets of the people of Georgia.
The General Assembly will kick off its 2024 session on January 8th.
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