ATLANTA (AP) — Shortly after grappling with budget cuts caused by flattening state revenue collections, the Georgia state House on Tuesday passed a proposal to reduce the state’s personal income tax to a flat rate of 5.375%.
Republican Rep. Brett Harrell of Snellville, one of the sponsors of House Bill 949, said it would ultimately reduce tax revenue by $250 million per year.
It would be the second reduction to Georgia’s tax rate in recent years. The General Assembly voted to cut the state’s top income tax rate from 6% to 5.75% in 2018, and a further cut to 5.5% was planned for this year.
Republican House Speaker David Ralston has said he viewed the bill as “delivering on that promise” made in 2018 for a further rate reduction.
The measure passed by a vote of 100-68. It goes next to the state Senate for more debate.
In addition to reducing the income tax rate and doing away with Georgia’s current tiered system, the proposal would also institute a new income tax credit for working families meant to offset the flattening of Georgia’s tax brackets, Harrell said. It would also triple the adoption tax credit from $2,000 to $6,000, a plan proposed by GOP Gov. Brian Kemp.
If it becomes law, the proposed income tax changes would go into effect Jan. 1.
Harrell said it would cost the state $98 million in lost revenue in fiscal year 2021. He said several new tax collection methods — including a law passed earlier this year requiring third-party online marketplaces to collect sales taxes on behalf of sellers beginning April 1 — could cover the costs.
“There are a number of issues that we have in process and passed this year that will more than compensate for that revenue reduction,” Harrell said.
House Minority Leader Bob Trammell said the bill would mostly benefit wealthier Georgians.
“We’re shifting from a graduate income tax to a flat tax. And the consequence of that is that the taxpayers who will be in position to benefit most from this bill are higher income taxpayers,” Trammell said.
The House passed the income tax reduction shortly after passing its version of the 2021 state budget, which sought to restore some budget cuts called for by Kemp. The governor had proposed more than $300 million in cuts due to slowing state revenue growth.