Georgia Personal Income Tax Rate - "Given the high uncertainty surrounding the ultimate revenue impact, states should react cautiously. They must also be cautious as new threats to their fiscal stability loom, including the potential for cuts in federal aid to states and localities and the inevitability of another recession.” – Center on Budget and Policy Priorities
Georgia leaders are now rushing a massive tax package through the state General Assembly with limited debate and no clear calculation of the plan's true cost. Governor Nathan Deal and legislative leaders introduced a revised tax package on February 20, 2018, designed to reduce state revenue by about $1.4 billion annually once fully enacted.[1] This week's replacement for House Bill 918 responds to recent news that federal tax changes signed into law by President Donald Trump in December could generate a lot of new government revenue, with some estimates as high as $1 billion a year. The state's new plan includes cutting Georgia's personal and corporate income tax rates, resuming the jet fuel sales tax credit and doubling the state's standard deduction.
Georgia Personal Income Tax Rate
While the tax cuts may sound appealing to lawmakers on the surface, time may prove the plan to be expensive but foolish. The proposal comes at a time when Georgia's fiscal future faces an unusually high degree of uncertainty. Final revenue collections may fall short of projections due to the high level of complexity caused by the federal tax changes enacted in December.[2] An economic recession could be lurking around the corner. Congress is reportedly considering sweeping budget cuts to key services like Medicaid and food assistance that have the potential to shift big new costs to state taxpayers. Income tax rate cuts also tend to become more burdensome in the long run than expected, as states like Kansas and Louisiana have found out the hard way.[3]
Georgia Revenue Primer For State Fiscal Year 2023
The tax cut plan also cements the tough decision Georgia lawmakers made to cut taxes instead of boosting investment in families and communities. In recent years, state leaders have lacked services and investments in education and health care, investments that are important to the economy and critical to maintaining thriving communities. Instead, lawmakers could use at least some of the additional annual revenue to fill those gaps and take other public investments to the next level.
For example, $1.4 billion a year in new state revenue is roughly equal to the revenue needed to close Georgia's health coverage gap, fully fund the state's K-12 education formula, free technical college tuition, create an assistance program of need-based colleges. , introduce a State Earned Income Tax Credit and provide universal child care for low-income Georgians under the age of 5 together.
Changes in national tax laws often affect government revenues. As things stand, legislation that Congress and President Trump approved in December is expected to raise revenue in Georgia, which links the state income tax system to the federal tax system, as most states do, as further explained in our analysis of the original HB 918 .. [4]
Initial projections show that Georgia's revenue will increase if lawmakers tie the state's adaptations to federal tax law as usual. The first set of projections released by state experts in late January suggested that if lawmakers follow their usual adjustments to federal tax changes, the new law could increase revenue by about $735 million a year on average over the next five years [5]. Later US estimates put average revenues at $940 million per year during the same period [6]. A third iteration of the state raised the estimate to $1.04 billion annually, according to the Atlanta Journal-Constitution. And a separate estimate by the nonpartisan Institute on Taxation and Economic Policy in Washington puts the potential gain at $1.02 billion annually.[7] For context, $1 billion in revenue equals about 4 percent of Georgia's expected taxes and fees for the upcoming 2019 budget year, which begins July 1, 2018.
Georgia Pass Through Entities
Most parts of the proposed legislation expire at the end of 2025, which is similar to the federal tax law signed into law in December. Lawmakers appear poised to act quickly on the proposal. The governor unveiled the legislation around noon on Feb. 20. The House Tax-Writing Committee approved it about three hours later. The House Rules Committee rushed through its gatekeeper responsibilities the next day and scheduled the sweeping tax changes for full House debate the following day.
The tax plan is likely to reduce state revenue by about $1.4 billion annually once fully implemented by 2020, according to estimates by the nonpartisan Institute on Taxation and Economic Policy.[9] Because the plan is phased in over three years, its total cost is approximately $5.5 billion over five years. The numbers closely resemble media reports of the state's own preliminary estimates. An estimated $5.7 billion in revenue could be deducted from Georgia's coffers in five years, according to the Atlanta Journal-Constitution.[10]
The tax plan eliminates about $1 billion in new gains that would otherwise have been created by federal tax reform. It then cuts deeper into Georgia's existing revenue stream. Instead of making about $5 billion over five years, Georgia lost about $500 million over that period. Additional costs may accrue in subsequent years. The difference between what the state gains from the federal tax changes and what it stands to lose from HB 918 once fully implemented is about $400 million a year, according to the Institute on Taxation and Economic Policy.[11]
If Georgia lawmakers use their usual method of aligning the state tax code with the federal package passed last December, taxpayers will receive slightly higher state tax bills on average. The tax proposal avoids this by cutting taxes on Georgians across the board, with a relatively modest cut for low- and moderate-income earners and larger cuts for wealthy taxpayers.
Georgia Has A Nearly $11 Billion Surplus. Does That Mean We Could See Tax Rebate Checks Again?
For example, a typical family in the middle fifth of Georgia taxpayers, or households with incomes around $46,000, is expected to pay the state an extra $122 a year because of the federal changes. The effect of HB 918 is to reduce this Georgia household's tax bill by about $163 per year in the future. That's assuming lawmakers approve the bill's provision to cut Georgia's top rate to 5.5 percent in 2020. The combined effect means a family will pay about $40 a year less in Georgia taxes than before passage of federal tax law.
The rush to reduce Georgia's revenue is ill-timed because it coincides with an uncertain fiscal trajectory and carries at least some risk of unintended consequences. Three main points to keep in mind:
Revenue projections based on the interaction of federal and state taxes are guesswork at best. Serious questions surround the theoretical revenue projected for Georgia due to federal tax audits. The sweeping nature of the federal changes and the complexity of the interaction between federal and state taxes make calculating the potential revenue effects an imprecise exercise.[12]
External factors can threaten the expected revenue. Other threats to Georgia's budget also loom on the horizon, such as the potential for large-scale federal budget cuts and the inevitability of another future recession. President Trump's budget proposal this month makes deep cuts to Medicaid and slashes the Supplemental Nutrition Assistance Program by nearly 30 percent over 10 years.[13] The fallout from these federal cuts is sure to put pressure on state budgets.
State Income Taxes: Highest, Lowest, Where They Aren't Collected
State lawmakers may need revenue for an unprecedented economic development project. Reports indicate that state lawmakers may be willing to offer more than $1 billion in public subsidies to entice Amazon to choose a Georgia location for its second headquarters.[14]
The tax cut plan also prioritizes modest tax cuts for most families over worthy priorities, such as providing families with quality education and affordable health insurance.
Georgia's leaders in recent years have consistently experienced a lack of services and investments important to the economy and vital to thriving communities. State leaders cut Georgia's public school funding formula by about $9 billion between 2003 and 2018, for example.[15] Georgia leaders also continue to argue that they cannot afford to expand Medicaid under the federal health care law, which leaves about 240,000 Georgians stranded without health coverage and leaves about $12 billion in federal dollars on the table.[16 ]
Source: Institute on Taxation and Economic Policy Analysis of HB 918S and Projections of Various Public Investments
Independent Analysis Finds Proposed Georgia Flat Tax Would Create Jobs, Spur Economic Growth
An influx of $1 billion a year could give lawmakers a chance to fill those gaps and make other urgent public investments. With $1.4 billion a year in state revenue, Georgia lawmakers could close the health coverage gap, close the K-12 savings gap, make technical college tuition free, create a need-based college assistance program, introduce a state income tax credit and provide . universal child care for low-income Georgians under the age of 5. Such radical changes deserve an open debate that pits them against the need for moderate tax cuts.
[5] analysis of state estimates described in "Federal tax bill could mean huge state benefit for Georgia."
[12] For example, because large segments of the federal tax plan were rushed through Congress and written in haste, taxpayers and auditors are likely to discover as-yet-undiscovered loopholes that change initial assumptions about taxpayer behavior and government revenue collection .
[14] Governor Deal indicated last month that lawmakers could reconvene
Taxes In Georgia (country): Income, Corporate, Vat, & More
Georgia income tax rate, federal personal income tax rate, highest personal income tax rate, ohio personal income tax rate, georgia state income tax rate, us personal income tax rate, personal income tax rate in nigeria, georgia income tax rate for retirees, new york personal income tax rate, personal income tax rate, what is georgia income tax rate, georgia personal income tax
