The Georgia Senate is set to vote on Wednesday regarding the potential reduction of the state’s income tax.
House Bill 1015 aims to reduce the individual income tax rate from 5.49% to 5.39% starting from January 1, 2024. Subsequently, it plans to gradually decrease the rate by 0.1% each year, beginning on January 1, 2025, until it reaches 4.99%.
If the governor’s revenue estimate for the next fiscal year is not at least 3% higher than the current fiscal year, the measure includes certain provisions that could potentially delay the decrease.
Moreover, the decrease may be postponed if the net revenue collection of the previous fiscal year does not exceed the combined revenue of the three preceding fiscal years. Additionally, if the Revenue Shortfall Reserve does not have sufficient funds to cover the expected decrease in state revenue resulting from the reduction in tax rates, the decrease could be further delayed.
The Office of Planning and Budget will prepare a report every year by December 1st under the new measure.
To determine if the upcoming decrease will be delayed.
In April 2022, Republican Governor Brian Kemp signed HB 1437 into law. This legislation establishes a flat tax rate of 5.49% for the tax year starting on January 1, 2024. Governor Kemp hailed it as “the biggest tax reduction in Georgia’s history.”
According to a recent joint report by the Georgia Public Policy Foundation and The Buckeye Institute, it is ideal for tax codes to be simple and transparent, with low rates and broad bases, in order to maximize growth. The report commends Governor Brian Kemp and the Georgia legislature for their efforts in pursuing tax cuts and other reforms that align with these objectives.
According to The Tax Foundation’s analysis, Georgia has a top marginal tax rate of 5.49%, which is better than South Carolina’s rate of 6.4%. However, Georgia’s rate is slightly higher than North Carolina’s rate of 4.5% and Alabama’s rate of 5%. It’s worth noting that Florida and Tennessee do not have income taxes.
Lawmakers are also expected to consider HB 1023, which aims to align the business tax rate with the individual income tax rate.
During a recent Senate Committee on Finance meeting, state Sen. Chuck Hufstetler, R-Rome, expressed his personal preference for a lower personal income tax rate. However, he acknowledged that the data indicates that lowering the corporate rate stimulates more economic activity. “I wish it was the opposite, but that’s just what the data says,” he added.