Big Georgia income tax cuts would come with costs to residents

Republican senators are pitching giant income tax cuts to make Georgia more affordable, a plan that Democrats warn could lead to fewer government services or sales tax hikes.

The income tax relief proposal, which passed the state Senate last week, would exempt the first $50,000 of annual earnings by an individual and $100,000 for a married couple while lowering the income tax rate.

To fund such sweeping tax cuts, the Senate’s Republican majority is seeking to end tax breaks for new data centers and other business interests. But eliminating those tax breaks would save less than $3 billion a year, and the income tax overhaul would cost the state government $6 billion.

Another Republicansponsored bill would slash the state’s income tax rate, from 5.19% to 3.99% by 2028, adding another $3 billion to the loss of government revenue.

If sales tax rates rise or the government scales back public spending, residents will pay the price, said Danny Kanso, a budget analyst for the liberalleaning Georgia Budget & Policy Institute. “The working class and middle-class folks might get hit twice — they might see their taxes going up and they might lose services,” Kanso said. “There are a lot of losers, and there might be very few winners.”

R epublican supporters of the tax cuts dismiss those concerns, saying the middle class needs relief from rising prices.

The total amount of Georgia’s annual tax breaks for businesses is $30 billion, a ready funding source to reduce income taxes paid by residents, said state Sen. Blake Tillery, R-Vidalia, during a Senate debate last week.

“Are we going to vote to allow corporate welfare and corporate subsidies at the expense of families who are trying to pay for gas, groceries, and child care?” Tillery asked. “Or are we going to comb back those credits … and eliminate that tax burden on those hard-working families?”

State Sen. Elena Parent, D-Decatur, called the income tax cut bills a “scam” and a “fairy tale.”

She said she’s worried that Republicans will try to make up for the revenue loss by raising sales taxes, cutting public services or shutting down public universities.

“It is complete magical thinking,” Parent said of the income tax cut bills during a Senate speech. “It's about delivering a headline without telling you what happens next when politicians promise you something for nothing. It's usually you who will end up paying.” So far, the income tax bills don’t seek those kinds of sales tax increases or government downsizing.

The proposals would be partially funded by eliminating a series of tax breaks for data centers, rent-controlled apartments, insurance companies, business headquarters, banks, crab fishermen, electric vehicle chargers, telecommunications facilities, and boat repairers, among others.

The fate of the income tax plans is in flux now that they’re in the hands of the state House, which could amend Senate Bills 476 and 477, or move forward with its own ideas.

House leaders are promoting a different way of trimming residents’ tax burden: They want to eliminate property taxes on a homeowner's primary property, replacing them with different kinds of taxes for services such as schools, police and fire departments.

“If you don’t decrease your cost of government, then all you’re doing is shifting around the burden of paying for government,” said Clint Mueller, deputy director of the Association County Commissioners of Georgia, which advocates for county governments. “If you take it off one type of taxpayer, it has to be paid by a different type of taxpayer.”