Lawmakers Wise to Reject Reckless Income Tax Measures

This year’s General Assembly produced no shortage of big debates, with subjects from religious exemptions to rape kits grabbing statewide and even national headlines. But beneath the surface lurked a serious threat to Georgia’s well-being that didn’t make it onto many front pages or the late night shows. A pair of tax-slashing proposals, House Bill 238 and Senate Resolution 756, threatened to compromise Georgia’s ability to fund key services while providing little or no benefit to most hardworking families. Both bills passed the state Senate before failing in the other chamber. House leaders were wise to heed GBPI’s advice and leave them on the cutting room floor.

Each of the proposals would’ve caused serious problems for Georgia’s finances and economic well-being. In the short-term, HB 238 and SR 756 if passed in tandem would’ve cut income taxes at an estimated five-year price of more than $2 billion in lost revenue. A revenue loss of that size could critically undermine Georgia’s investments in good schools, well-maintained roads and other building blocks of a prosperous state. Slashing income taxes and locking some of the cuts into the state’s constitution could also jeopardize Georgia’s AAA credit rating, which ensures the state gets a good deal when it borrows money to fund big-ticket public works such as transportation projects.

Despite the sizable hit to the state’s ability to meet its needs, the tax cut offered little potential payoff for most Georgia families. Georgia taxpayers with annual incomes below about $100,000 stood to gain an average tax cut of less than $100 from HB 238, as detailed in our two-page fact sheet . In contrast, the top fifth of Georgia taxpayers, or households with incomes above about $100,000 a year, stood to enjoy more than half the total benefit.

The second measure, SR 756, posed even greater long-term risks to Georgia’s economy and families. The measure threatened to lock a formula into the state’s constitution to force a series of additional income tax cuts if certain revenue targets were met. Though seemingly small at first, the rate reductions could have cost hundreds of millions a year in lost revenue and handcuffed lawmakers’ ability to meet the needs of an increasingly large and diverse state. GBPI sounded the alarm early and worked to educate lawmakers on the gravity of the danger.

Lawmakers can return to the well over the next two-year legislative cycle to explore more targeted, fiscally responsible updates to Georgia’s tax system. They could salvage some of the positive aspects of this year’s tax bills, such as limiting special income tax deductions, and pair them with policies more targeted toward working families like enacting a new state Earned Income Tax Credit. Other ideas are included in our step-by-step 2015 proposal “A Tax Blueprint to Strengthen Georgia.”

By rejecting this year’s proposals, Gov. Nathan Deal and other Georgia leaders wisely avoided the kind of slash-and-burn tax policies that are hammering peer states such as Kansas, Louisiana and North Carolina. That sensible choice should be a model for decision-makers in the 2017 session and beyond. The temptation to slash income tax rates will surely return, as it always does, but the risks will remain. GBPI will continue to stand guard then as we did this year, working to ensure any big tax changes are good for Georgia’s families, finances and economic future.